When GST Gets Cancelled?
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 canceled 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.
How to Cancel GST Registration
There are three ways in which GST cancellation can be initiated:
- The tax department initiates GST cancellation
- A registered taxable person applies for the 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. A 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
- the 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. A 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 canceled.
6. Failing to File Tax Returns Under Composition Levy
If a person registered under GST composition tax scheme fails to furnish returns for a continuous period of three months, his GST number gets cancelled on account of such a failure.
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.
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.
Created & Posted By Ravi Kumar
CA Article at TAXAJ
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