You have the option to cancel your GST registration if the GST rules do not apply to your situation, if you are closing your business or profession, or if the tax officer requests the cancellation.
What is GST Registration Cancellation?
Cancellation of GST registration means the taxpayer won't be considered a GST registered person anymore. They won't have to pay or collect GST, claim input tax credit, or file GST returns.
If you obtain a GST registration but no longer conduct any business activities, it's essential to initiate the GST cancellation process as outlined. Allowing your GST registration to expire without filing GST returns can prevent you from applying for a new GST registration with the same PAN.
Moreover, if the government cancels your GST registration, you will need to pay any late fees and request the cancellation to be revoked. After restoration, you can either proceed with the cancellation or resume filing GST returns.
Therefore, once you have a GST registration, it's crucial to stay compliant. If your business becomes inactive, it's advisable to apply for GST registration cancellation promptly.
Grounds for GST Cancellation
GST registration can be canceled based on several grounds, with the most common ones being:
Non-filing of Returns: If a taxpayer fails to file GST returns continuously for six months, their registration may be canceled.
Non-payment of Taxes: Registrants must pay their taxes on time; failure to do so for six months or more may result in registration cancellation.
Voluntary Cancellation: Taxpayers may voluntarily cancel their GST registration if they are no longer liable to register under GST due to factors such as falling below the turnover threshold.
Misrepresentation of Facts: Providing false information during the registration process can lead to GST registration cancellation.
Inactivity of Business: If a registered taxpayer remains inactive for a continuous period of twelve months, their registration may be canceled.
Transfer of Business: GST registration may also be canceled if the business is transferred to another person or entity.
Tax & Process
Step 1: Submission of GST Cancellation Application
Visit the common GST portal and submit the GST cancellation application using Form GST REG-16.
Include the following information in the application:
Contact address, including mobile number and email address.
Reason for cancellation.
Desired cancellation date.
Details of the value and tax payable on different categories of stock, including inputs, semi-finished goods, finished goods, and capital goods/plant and machinery.
Information about the latest GST return filed, along with the ARN (Application Reference Number) of that return.
Step 2: Review by GST Officer and Issuance of Cancellation Order
The GST Officer will review the application and issue a cancellation order in Form GST REG-19 within 30 days from the date of application.
The effective date of cancellation will be determined by the Officer, and you will be notified of this date.
To cancel GST registration, you will typically require the following documents:
PAN Card: The PAN card of the authorized signatory.
Aadhaar Card: The Aadhaar card of the authorized signatory.
Last Return Details: Details of the last return filed by the taxpayer.
Company Authority Details: Information on mergers, demergers, or transfers if applicable.
Tax Particulars: Information regarding tax payable on various categories of goods and stock.
Why is GST Cancellation Important?
GST cancellation is important because it removes non-compliant taxpayers from the GST network, ensuring compliance with GST laws and creating a level playing field for compliant taxpayers.
What are the Grounds for GST Cancellation?
Common grounds for GST cancellation include non-filing of returns for six consecutive months, non-payment of taxes for six months or more, voluntary cancellation when no longer liable, misrepresentation of facts during registration, business inactivity for twelve months, and transfer of business.
What are the Consequences of GST Cancellation?
Consequences of GST cancellation include loss of credibility, inability to collect GST, legal action, inability to claim input tax credit, and difficulty in re-registration.
How to Avoid GST Cancellation?
To avoid GST cancellation, businesses must file returns and pay taxes on time, provide accurate information during registration, conduct regular compliance checks, and respond promptly to notices from tax authorities.
What are the Impacts of GST Cancellation?
GST cancellation can lead to reduced sales, income, and tax credits for inputs. It may also result in legal issues and challenges in re-registering under GST. Businesses must adhere to GST laws to prevent cancellation and its adverse effects.