Introduction

The Goods and Services Tax (GST) is a comprehensive indirect tax system that was introduced in India on July 1, 2017. The GST subsumed a number of indirect taxes, such as excise duty, service tax, and VAT, and created a single tax regime for goods and services across the country.

One of the key features of the GST is the concept of registration. Under the GST, every person who is engaged in the supply of goods or services, and whose taxable turnover exceeds a specified threshold or who are required to get themselves registered mandatory under the provision of the GST Laws, is required to obtain a GST registration. The GST law empowers the GST authorities to suspend or cancel a taxpayer’s GST registration in certain circumstances. Suspension of GST registration can have a significant impact on a taxpayer’s business, as it can prevent the taxpayer from issuing tax invoices, claiming input tax credit, and filing GST returns. In this article, we will analyse the impact of GST registration suspension, and discuss some of the landmark judgements that have been delivered on this issue.

Legal Aspects of Cancellation/Suspension of the GST Registration

Section 29 of the Central Goods and Services Tax Act, 2017 deals with the Cancellation/Suspension of Registration.

Section 29(1) prescribes the circumstances in which Proper Officer as well as a registered person including his legal heirs (In case of death of the Registered Person) may initiate the procedure for the Cancellation/Suspension of the GST Registration on the below mentioned grounds: 

• The business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; 
• There is any change in the constitution of the business; or
• The taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

Proper officer also has a right to Suspend/Cancel the GST Registration Certificate of the registered person on the ground mentioned under Section 29(1), Section 29(2) of the CGST Act, 2017 read with the provision mentioned  under Rule 21 of the CGST Rules, 2017 which are prescribed as under: 

• The business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; 
• There is any change in the constitution of the business; or
• The taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

• A registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

Rule 21 has prescribed certain situation under which the Registration Certificate may be cancelled which are as under:

1. Does not conduct any business from the declared place of business; or 
2. Issues invoice or bill without supply of goods or services in violation of the provisions of this Act, or the rules made thereunder; or 
3. Violates the provisions of section 171 of the CGST Act, 2017 or the rules made thereunder. 
4. Violates the provision of rule 10A of the CGST  Rules, 2017.
5. A person paying tax under section 10 (Composition Levy/Concessional Tax) has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or
6. Any registered person, other than a person Registered Under Section 10 (Composition Levy/Concessional Tax), has not furnished returns for such continuous tax period as may be prescribed; or
7. Any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
8. Any person who has obtained registration by means of fraud, willful misstatement or suppression of facts.

Procedure for Cancellation/Suspension of GST Registration

By the Registered person

• Registered person has to file Form GST REG-16 electronically within 30 days from the date of occurrence of the event mentioned in the Section 29(1) of the Act of 2017 with the details mentioned in the said Form with all the necessary supporting documents.
• a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted.
• Rule 21A of the CGST Rules, 2017 deals with the Suspension of the Registration Certificate. Rule 21A(1) of the CGST Rules, 2017 Provides that, Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

By the Proper Officer

• Proper Officer Shall issue Show Cause Notice (SCN) to the Registered Person in Form GST REG-17. It is to be noted that to give an opportunity of being heard is a compulsory as per the 1st proviso to the Section 29(2)(e) of the CGST Act, 2017.
• Registered Person has to Show Cause why his Registration Certificate is not liable to be cancelled within 7 days from the date of receipt of the SCN in Form REG-18.
• If reply submitted by the Registered Person is not satisfactory then, within a period of thirty days from the date of the reply to the show cause issued, cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of section 29.
• Where the reply furnished is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST REG –20.
• Provided that where the person instead of replying to the notice served for contravention of the provisions contained in clause (b) or clause (c) of subsection (2) of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST-REG 20.
• Rule 21A(2) of the CGST Rules, 2017 provides that, where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration. 

Effect of the Cancellation/Suspension of the GST Registration 

A Person whose GST Registration is Cancelled/Suspended has to bear the following circumstances:

• The cancellation of registration shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation. Therefore, persons whose Registration has been Cancelled are not abscond from the Liability to Pay Tax under GST Law.
• The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.
• Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed. Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
• A registered person, whose registration has been suspended, shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.

How to Activate the Cancelled/Suspended Registration ? 

A registered taxpayer can apply for reactivation of GST registration within 30 days of the suspension order being issued by an authorised GST officer. However, it is not possible to reactivate a GST registration that has been voluntarily suspended.

Here are some of the steps involved in the reactivation of a Cancelled/Suspended GST registration:

1. File an application for reactivation in Form GST REG-21.
2. Pay the applicable fees.
3. Provide evidence that the reasons for suspension have been addressed.
4. Rectify any other compliance deficiencies that may have led to the suspension.

Once the application for reactivation is approved, the GST registration will be restored to its active status.

It is important to note that the reactivation of a suspended GST registration does not automatically cancel any penalties or interest that may have accrued during the period of suspension. Taxpayers who have had their GST registration suspended should carefully review their compliance status and take steps to rectify any deficiencies in order to avoid further penalties.

Conclusion

It is to be noted that, it is very important for the Registered person to comply with GST Act, Rules made thereunder, Various Notifications and Circulars issued by the Concerned Authority under the GST Regime to avoid the Suspension/Cancellation of your GST Registration. 

 

Author: Parthvi Patel, United World School of Law