The Goods and Services Tax (GST) regime is considered a significant and progressive development over the prior authority of myriad indirect taxes – VAT, Service Tax, octroi, Customs, Import Duty, CenVA, and much more.
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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.
To successfully cancel your GST registration in 2023, it is necessary to take certain steps. Start by understanding the cancellation process and relevant laws, ensuring you have all the necessary documents ready, checking your eligibility for cancellation, and communicating with tax authorities for any queries or concerns to prevent unnecessary delays. Finally, seek the advice of a professional like an accounting expert if you are unsure about the process, as they can provide expert guidance and ensure a smooth cancellation process.
The online compliance mechanism for GST has brought many services to the fingertips of business owners and managers – for which they used to run from pillar to post. The services offered by the GST Network include an online application for new GST registration, filing and rectifying GST returns, getting details of the input GST credit, getting GST refunds, and even canceling GST registration.
What Is GST Registration Cancellation?
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 nor 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 beneficiary of or liable for any gains or penalties before the date of such cancellation.
Registration under the GST Act is mandatory for specific categories or scales of businesses. If such companies continue to operate after the central authority cancels 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 it can neither collect GST nor 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 various reasons why the GST registration cancellation is initiated. The following are the valid reasons why proceedings for GST cancellation start:
1. The Assessee is Not Required to be Registered
Most businesses and service providers 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 business constitution 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 violating 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. GST cancellation may occur if they fail to file tax returns continuously for three months.
6.2. By Regular Assessees
For assessees not registered under the composition scheme, the maximum duration for filing monthly/quarterly returns is six months. Their GST registration number gets canceled if they fail to file returns in this period.
7. Failure To Start Business
In some cases, after taking voluntary GSTIN u/s 25(3) of the CGST act, assessees could not or did not start the business within six months or 183 days 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 registration or the business owner’s death.
Regular and registered GST assessees who have earlier issued GST invoices must apply for cancellation in Form GST REG-16:
The following is the step-by-step GST registration cancellation process:
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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 the 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
- Verification
Step 3: Enter Basic Details
Click on the ‘Basic Details‘ section and correctly fill in all the data. 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:
- 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 business control due to merger & demerger or outright sale of the company.
- Others.
- Effective date for cancellation of GST registration.
- Particulars of tax liability on:
- Inputs within semi-finished goods, finished goods, and capital goods.
- The Stock of inputs.
- The Stock of Capital.
- Select ‘Electronic cash ledger’ or ‘Electronic credit ledger’ to offset the tax liability.
- Fill in the details of your last filed GST return.
- 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:
- ARN
- 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.
What Are The Implications Of GST Registration Cancellation?
The following are the impacts of the cancellation of GST registration:
- The taxpayer will no longer be liable to pay GST.
- If a business for which GST registration is mandatory continues to operate after it is canceled. In that case, it will be considered a violation under GST laws and may result in substantial penalties.
Revocation of Cancellation of Registration
Revocation means to officially cancel or withdraw a decision or commitment. In the context of a registration, revocation of cancellation implies that the decision to terminate a taxpayer’s registration has been overturned, and the registration remains valid.
This requirement applies specifically in situations where a tax officer has canceled the registration of a taxable individual without their plea. If this occurs, the taxable person is allowed to request the authority for revocation of cancellation within a period of 30 days from the date of the cancellation order.
Wrapping Up
The GST registration cancellation process may seem complicated, but it is essential for businesses that no longer need GST registration. It is vital to note that companies must carefully evaluate their situation and ensure that they meet the criteria for cancellation before proceeding with the process.
Not complying with this requirement could lead to penalties or legal consequences. Taxable persons can cancel their registration or have their registration canceled by the authorities due to violations.
Furthermore, seeking guidance from a tax professional is advisable to meet legal requirements and complete the GST cancellation process successfully. With the appropriate knowledge and direction, firms can cancel their GST registration and continue working.
Though the GST cancellation procedure may seem complicated, businesses can navigate it smoothly and move forward with the right approach and advice. The key is understanding obligations, evaluating eligibility, and complying with procedures. With care and support, businesses can overcome perceived difficulties and achieve the cancellation of their GST registration.
Frequently Asked Questions
If a business has ceased operations, canceling its GST registration is mandatory according to GST regulations. The rules state that if a business has closed down or is no longer functioning, its GST registration must be terminated. The cancellation can be initiated voluntarily by the business entity or the authorities if violations are detected.
According to the GST rules, taxpayers cannot cancel their GST registration if they have any pending GST liabilities or a refund due. Before initiating the process of cancellation of registration under GST, the taxpayer must ensure that all outstanding liabilities have been cleared.
Once the application for cancellation of GST registration is accepted, the process should be completed within 15 days. However, depending on application complexity and GST department workload, it could take up to a month.
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