GST Registration Cancellation

When GST registration is cancelled, the person or entity is no longer identified as a GST-registered taxpayer. This termination implies that they aren’t required to gather, submit, or pay GST. Moreover, they can’t claim input tax credits, and the responsibility of filing GST returns is also lifted from them.

The Importance of Timely GST Cancellation

If no business activity occurs after acquiring GST registration, the taxpayer must begin the GST cancellation process as outlined. If a taxpayer stops filing GST returns and allows his GST registration to lapse, he cannot apply for fresh GST registration using the same PAN.

• Further, if the government cancels a GST registration, the taxable person must first apply for the cancellation to be revoked by paying any late fees. Following the restoration, appropriately cancel the GST or continue filing GST returns.
• As a result, once a GST registration is received, the taxpayer must keep track of compliance. Hence, if there is no commercial activity, apply for GST registration cancellation as soon as possible.

• Reasons for Cancellation of GST Registration

  GST registration can be cancelled by the taxpayer or by the GST authorities due to various reasons. Here are the key reasons for such cancellations:

  Initiated by the Taxpayer:

  • Discontinuation or Closure of Business: When business operations are permanently closed or discontinued, the taxpayer can file for the cancellation of GST registration.

  • Business Transfer: If the business is transferred, merged, sold, leased, or disposed of, the taxpayer may opt to cancel the GST registration. 

  • Change in Business Structure: When the business structure changes, such as converting a partnership firm into a corporation, the taxpayer must cancel the existing GST registration.

  • No Longer Liable to Pay GST: If the taxpayer’s turnover falls below the GST threshold limit and is no longer required, the taxpayer must apply for cancellation.

  • Voluntary Cancellation: A taxpayer may voluntarily cancel the GST registration for personal or business reasons.

    Consequences of Cancellation of GST Registration

    The cancellation of GST registration has several significant implications for businesses. Here are the key consequences:

    Cease to Collect GST:

    Once GST registration is cancelled, a business can no longer collect GST from its customers. The business must update all billing and invoicing systems to ensure GST is not charged after the effective date of cancellation.

     

    No Input Tax Credit (ITC): 

     

    Purchases made after the cancellation of GST registration are not eligible for ITC. Additionally, the taxpayer must pay an amount equivalent to the ITC for goods held in stock, inputs in semi-finished or finished goods, and capital goods under certain conditions as of the day immediately preceding the date of cancellation.

    Filing of Final Return:

    The taxpayer must file a final return using Form GSTR-10 within 3 months from the date of cancellation or the date of the cancellation order, whichever is later.

    Compliance and Record-Keeping:

    Even after cancellation, businesses must maintain financial records, accounts, and documents for a period of 6 years from the date of cancellation. This is necessary for any future audits, investigations, or compliance checks by tax authorities.

    Legal Implications:

    Failure to comply with GST law provisions after cancellation, such as not filing the final return or not paying the amount due on ITC reversal, can lead to penalties and legal action by GST authorities.

     

    Impact on Business Operations:

     

    GST registration cancellation can disrupt regular business operations. Reapplying for GST registration after cancellation involves a fresh application and scrutiny by tax authorities.

    Refunds:

    Eligible taxpayers may receive refunds for any excess GST paid after cancellation, provided they apply for a refund within the prescribed time frame.

    Cancellation of All Registrations on PAN:

    If a business operates in multiple states or has multiple business verticals within a state, cancellation of GST registration in one state or for one vertical may cancel all GST registrations associated with the same PAN across India.