Goods and Services Tax (GST) regime is considered a significant and progressive improvement development over the prior authority of myriad indirect taxes – VAT, Service Tax, octroi, Customs, Import Duty, CenVA, and much more.
The advanced IT ecosystem is the primary driver for bringing in this groundbreaking and unifying tax mechanism that is entirely online and does away with manual interventions.
The online compliance mechanism for GST has brought many services at the fingertips of business owners and managers – for which they used to run from pillar to post. The online services offered by the GST Network include an online application for new GST registration, filing, and rectification of GST returns, getting details of the input GST credit, getting GST refunds, and even cancellation of GST registration.
GST Registration Cancellation – What is it?
When the central GST Authority cancels the GSTIN of a business due to a valid reason, it is called cancellation of GST registration. After the GSTIN has been canceled, the assessee would no longer be considered a dealer or a business under the GST Act and would neither pay, not be able to collect GST.
With the cancellation of GST registration, all the future benefits and liabilities cease to exist -however, the assessee is still the beneficiary of or liable for any gains or penalties before the date of such cancellation.
For specific categories or scales of businesses, registration under the GST Act is mandatory. If such companies continue to operate after the central authority cancelled GST registration, they are liable for severe criminal and civil punishments and fines.
However, if the business is exempt from GST because it meets specific criteria, it can continue operating. But even then, neither can it collect GST, nor will it get the input tax credit.
Who can Initiate the Cancellation of GST Registration?
Three persons/bodies can initiate the GST cancellation process:
- A registered tax assessee voluntarily applies for GST registration cancellation.
- After the death of the registered tax assessee, their legal heirs may apply for GST cancellation.
- The Central Board of Indirect Taxes and Customs (CBIC) may initiate cancellation of GST registration – usually in response to some violations.
Why Cancel GST Registration?
There may be a variety of reasons why the GST registration cancellation is initiated. The following are the valid reasons which proceedings for GST cancellation start:
1. The Assessee is Not Required to be Registered
Most businesses and service providers who were earlier registered in the VAT and Service Tax laws were automatically registered under the GST. But due to increased limits on the minimum revenue – Rs. 40-lakhs for a supplier of goods, Rs. 20-lakhs for services and others, and Rs. 10-lakhs for North-Eastern and Hilly states – many businesses were not registered under the new GST regime.
2. Business has Discontinued
If the business operations discontinue for a financial year, the GSTIN can be canceled:
- Voluntary closure of business.
- Transfer of controlling rights of the business either fully or partially, including in the event of the death of the sole proprietor.
- Merger or acquisition of the business with another registered business.
- Demerger of business into multiple units.
- Liquidation of the business.
3. Change in the Constitution of the Business
There may be several reasons why the constitution of the business may alter and require the cancellation of the GST registration number. Some of them are:
- A private limited company becomes a public limited company or vice versa.
- An LLP or partnership is converted into a limited company.
- A sole proprietorship converts into a partnership by inducting new partner(s), or a partnership dissolves into different businesses held by former partners.
4. An Assessee is No Longer Required to be Registered
If the business owner finds that, for the foreseeable future, their turnover would be less than the threshold limit for mandatory GST registration, they can file for GST cancellation. However, this case does not apply if a person voluntarily registers u/s 25(3) of the CGST act.
5. Violation of GST Rules
If the central or state GST authorities find that the person is running the business in violation of the provisions of the GST Act, then they may cancel GST registration.
6. Not Filing Returns
6.1 Under Composition Scheme
A person registered under the GST Composition Tax Scheme is required to file monthly returns. If they fail to file tax returns continuously for three months, then GST cancellation may take place.
6.2. By Regular Assessees
For assessees not registered under the composition scheme, the maximum duration for filing monthly/quarterly returns is six months. If they fail to file returns in this period, their GST registration number gets canceled.
7. Did/Could Not Start Business
In some cases, it may happen that after taking voluntary GSTIN u/s 25(3) of the CGST act, assessees could not or did not start the business within six months from the date of registration. In this situation, too, GST registration cancellation happens.
8. Committing Fraud
If the GST registration number was obtained by fraud – by presenting falsified information, forgery, wrongful statement, or suppression of facts, etc. – then their GST registration cancellation occurs.
How to Cancel GST Registration?
In case of a voluntary GST cancellation or cancellation on account of the death of the assessee, one can visit the GSTN portal to initiate the cancellation of GST registration. The taxpayers must not have issued any GST invoice after their registration or the business owner’s death.
For regular and registered GST assessees who have earlier issued GST invoices must apply for cancellation of GST by filling the form: GST REG – 16.
The following is the step-by-step process for GST registration cancellation.
Step 1: Log in to GST Portal
Go to the GSTN portal at https://www.gst.gov.in/ and log in to your GST account.
Step 2: Choose Service Option
Click on the ‘Service Option’ located in the top navigation bar on your dashboard to see a dropdown list. Choose ‘Registration’ and then ‘Application for Cancellation of Registration.’ Now your dashboard will show the following 3 sections:
- Basic details
- Cancellation details
Step 3: Enter Basic Details
Click on the ‘Basic Details’ section and fill in all the data correctly. Especially check and verify the physical address, email address, and phone number for further communication. Save the details and move ahead.
Step 4: Enter GST Cancellation Details
You will need to furnish the following details in this section:
1. Reason for GST cancellation (select one):
- Business discontinued or wound up.
- Change in the constitution of business.
- Death of a sole proprietor.
- No longer liable to pay GST.
- Transfer of control of business due to merger & demerger, or outright sale of the company.
2. Effective date for cancellation of GST registration.
3. Particulars of tax liability on:
- inputs within semi-finished goods, finished goods, and capital goods.
- The Stock of inputs.
- The Stock of capital.
4. Select either ‘Electronic cash ledger’ or ‘Electronic credit ledger’ to set off the tax liability.
5. Fill in details of your last filed GST return.
6. If the existing business has transformed due to merger, demerger, conversion of the constitution, etc., then the GSTIN of the transferee entity shall be provided.
Step 5: Complete Verification Details
Enter the following details:
- Name of the authorized signatory.
- Place of the declaration.
- Further details of the authorized signatory as demanded.
- Choose the appropriate option before submitting.
- Upload DSC mandatorily if you’re filing the request on behalf of a company or LLP.
- Once all details are entered, an OTP will be sent to the registered mobile number.
Once OTP is verified, the acknowledgment is sent within 15 minutes.
Step 6: Track GST Registration Cancellation Status
1. Go to the ‘Services,’ then ‘Registration,’ and ‘Track Application Status’ options on the GST portal.
2. The dashboard will show two options:
- Submission Period
3. Click on the ‘Submission Period’ option, enter the cancellation application date, and click ‘Search.’ The latest status of your GST Cancellation application is displayed. The application is approved within a few working days of submission.
4. By clicking on the ‘ARN,’ you can generate Form GST REG-02 to acknowledge your GST Cancellation.
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