Analysis
Any Registration granted under this Act may be cancelled by the Proper Officer. The various circumstances and the provisions of the law on this subject have been outlined under this section.
A registration granted can be cancelled when –
— the business is discontinued, transferred fully for any reason including death of proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
— there is any change in the constitution of the business; or
— the taxable person is no longer liable to be registered under Section 22.
This is possible after the person is afforded an opportunity of being heard (except no such opportunity need to be provided in case the application is filed by the registered taxable person or his legal heirs, in the case of death of such person, for cancellation of registration) when –
— the registered taxable person has contravened such provisions of the Act or the rules made there under as may be prescribed; or
— a person paying tax under Composition Scheme has not furnished returns for three consecutive tax periods; or
— any taxable person who has not furnished returns for a continuous period of six months; or
— any person who has taken voluntary registration and has not commenced business within six months from the date of registration; or
— Where registration has been obtained by means of fraud, wilful misstatement or suppression of facts.
As such, cancellation of registration, shall not affect the liability of the taxable person to pay tax and other dues under the Act 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. The cancellation of registration under State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act shall be deemed to be a cancellation of registration under the Central Goods and Service Tax Act.
Where the registration is cancelled, the registered taxable person shall pay an amount 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 on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher. The payment can be made by way of debit in the electronic credit or electronic cash ledger.
In case of capital goods, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by the prescribed percentage points or the tax on the transaction value of such capital goods [under sub-section (1) of section 15 (Value of Taxable supply) of Act], whichever is higher. The amount payable under these provisions shall be calculated in accordance with generally accepted accounting principles. The supplier who intends to cancel his registration will be required to file his final return in Form GSTR-10 so as to complete cancellation of registration effectively. (Reference Notification No.: 21/2018 – Central Tax F. No.349/58/2017-GST (Pt.) Dated 18th April, 2018).
As per Rule 20 of the CGST Rules 2017 application for cancellation of registration by a registered person other than persons required to deduct TDS/ TCS or person to whom UID is granted needs to be made in Form GST REG-16 along with requisite details. In case of a person whose turnover does not exceed the threshold limit but has obtained registration voluntarily may also cancel registration any time during the year. This provision has been introduced vide Notification 3/ 2018 – Central Tax dared 23 January 2018. Earlier, such person could not apply for cancellation before expiry of one year from the effective date of registration.
Rule 21 of the CGST Rules 2017 provides for cases of Cancellation of Registration and includes the following:
a) does not conduct any business from the declared place of business or
b) issues invoice or bill without supply of goods or services in violation of the provisions of Act or Rules made thereunder.
c) violates the provisions of section 171 of the Act or the rules made thereunder.