GST is a major improvement over the previous indirect tax regime. It has paved the way for a uniform IT landscape and shifting from manual to online indirect tax compliance.
Thus, such online GST compliance has simplified the tax administration. This is unlike the previous indirect tax regime where compliance had to be done manually and separately for each of the indirect taxes.
This online GST compliance aims to bring efficacy and automation in various tax compliances and procedures under GST. Such compliances include online application for GST registration, GST return, GST refund and GST cancellation as well.
What is GST Cancellation?
Cancellation of GST registration means that the Central Tax Authority cancels the GSTIN issued to a taxpayer registered under GST initially. Such a cancellation would mean that the taxpayer whose GSTIN is cancelled would no longer be a registered person under GST. And he would also not have to pay or collect GST anymore.
Further, there are certain businesses where registration under GST is necessary. Therefore, if a business continues to function despite the GST cancellation, it would be liable to pay a heavy penalty for the same.
There are three ways in which GST cancellation can be initiated:
- The tax department initiates GST cancellation
- Registered taxable person applies for cancellation of his registration under GST
- Legal heirs apply for GST registration in case of death of a registered taxable person
Reasons For GST Cancellation
Following are the reasons on account of which GST registration can be cancelled:
1. Person not Liable to be Registered Under GST
There are cases where persons who were registered under any of the existing or old laws were not liable to be registered under the GST act. Say, for instance, the threshold limit for registration under VAT was Rs. 10 lakhs. Now the persons who were registered under VAT are not liable to be registered under GST because the threshold limit for registration under GST is Rs. 40 lakhs for goods.
2. Discontinuation of Business
GST number gets cancelled on account of:
- discontinuation of business
- full or partial transfer of business including the death of the sole proprietor
- amalgamation of business with other legal business entity
demerger or disposal of business
3. Change in the Constitution of the Business
GST number gets cancelled in case there is any change in the constitution of business.
4. Person is no Longer Liable to be Registered
A registered taxable person who is no longer entitled to be registered under the GST act can apply for GST cancellation. These taxable persons do not include those persons or individuals who have registered under section 25(3) of the CGST act voluntarily.
5. Contravention of GST Provisions
In case a person fails to comply with any of the provisions or rules under the GST Act, his registration number gets cancelled.
6. Failing to File Tax Returns Under Composition Levy
7. Failing to File Returns by a Normal Registered Person
If persons registered under GST who fail to furnish GST returns for a continuous period of six months, their GST number stands cancelled. These registered taxable persons are other than those persons who are paying tax under the GST composition scheme.
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Filing of GST Returns
8. Non Commencement of Business
There are cases where persons take voluntary registration under section 25(3) of the CGST act. But even after receiving the GSTIN they are not able to commence business within six months from the date of registration.
9. Obtaining Registration by Fraud
The GST registration gets cancelled if the same has been obtained by means of fraud, misstatement or suppression of facts.
Procedure For GST Cancellation
All the migrated taxpayers can cancel GST registration through GST portal. This means that taxpayers who have not issued any tax invoice after registration can use this service for GST cancellation. However, the registered taxable persons who have filed tax invoices need to fill out form GST REG – 16.
Access GST website using the following link https://www.gst.gov.in/ and login to your GST account by entering your login details.
Once you login to your GST account, click ‘service option’ from the top bar menu on your dashboard. After you click the ‘service option’, a dropdown will appear.
From the various options choose, ‘registration’ and then select ‘application for cancellation of registration.’ Once you select ‘application for cancellation of registration’, your dashboard screen will display the following three sections:
- Basic details
- Cancellation details
- Verification
Once your dashboard shows basic details, cancellation details and verification sections, click on the basic details section. Then, start filling the requisite basic details.
If the address for future correspondence is the same as the principal place of business, then check the box ‘same as above’ and click on ‘save and continue’ button.
Once you save your basic details, ‘cancellation details section’ would be displayed on the screen. Under ‘reasons for cancellation’ section, six options would appear as reasons for GST cancellation. These reasons are as follows:
- Change in the constitution of business leading to change in PAN
- Ceased to be liable to pay tax
- Discontinuance of business/closure of business
- Others
- Transfer of business on account of amalgamation, de-merger, sale, leased or otherwise
- Death of a sole proprietor
Further, the following details need to be filled in the cancellation form:
- Reason for GST cancellation
- Desired date to cancel GST registration
- Particulars on which tax is payable:
- on inputs contained in semi-finished and finished goods/capital goods
- stock of inputs and
- stock of capital
- Choose electronic cash ledger or electronic credit ledger to set off tax liability
- Details of your last tax return filed
In case the existing unit is merged/demerged/transferred etc then the GSTIN of the transferee entity needs to be given.
Once the cancellation form details are filled, the verification section will appear on the screen. Fill in the name of the authorized signatory and the place of making the declaration.
Next, fill in further details based on the authorized signatory details already mentioned. Then choose the relevant option to submit. In case you have a company/LLP, then it is mandatory to upload DSC. Once you submit the details on the verification section an OTP is generated.
Enter OTP and a message is displayed on the screen indicating that submission of details has been done successfully. And the acknowledgement will be sent within 15 minutes.
To track the acknowledgement, you again have to go on the homepage of the GST portal and click ‘Services’. Under ‘Services’, click ‘Registration’. Once you click ‘Registration’, too many options are displayed. You need to click on the ‘Track Application Status’ option.
Upon doing so, the dashboard will display two options. One is ‘ARN’ and the other is ‘Submission Period’. Click the ‘Submission Period’ option and fill the date when you applied for GST Cancellation and then click ‘Search’.
On clicking ‘Search’, the entire status of GST Cancellation is displayed on the dashboard. Once the status is ‘Approved’ after a few days of submission of application for GST Cancellation.
Further, if you click the ARN Number, Form GST REG-02 is generated. This Form is the acknowledgement certificate for your GST Cancellation.
