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Everything to Know About Cancellation of Registration in GST in Q&A Form

In Erstwhile Central Excise or Service Tax Regime , Registered Persons were not required to pay Excise Duty or Service Tax as the case may be if their Turnover was lower than Taxable Limits. However, in GST Law, if some one has taken Registration albeit voluntary, he needs to comply with provisions of the GST like a normal taxpayer and pay GST even if its turnover is lower than taxable limits.


Therefore, in many of cases, circumstances may arise which requires cancellation of Registration. In this article, we will discuss each and everything about Cancellation of Registration including relevant circulars in Simplified Manner with the help of Questions & Answers.


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Questions Addressed in the Post

Question: How Proceedings for Cancellation of Registration can be initiated ?


Department on its own or on the request of the Taxpayer or on the request of Legal Heir in case of death of such Taxpayer, can initiate the Proceedings of Cancellation of Registration.


Question: What can be the Ground for Cancellation of Registration?


(a) The business has been discontinued, transferred fully for any reason including death of

the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of;


(b) There is any change in the constitution of the business; or


(c) The taxable person is no longer liable to be registered under section 22 (Persons Liable for Registration in case Turnover exceeds Threshold limit) or section 24 (cases where Compulsory Registrations) or intends to optout of the registration voluntarily made under sub-section (3) of section 25.


Note: During Proceedings of Cancellation of Registration, the registration may be suspended for such period. (For Complete details on Suspension of Registration, Please read at : Complete Details about Suspension of Registration).


Question: What would be the Procedure for Cancellation of Registration?


A registered person, Except to whom a registration has been granted under rule 12 (TDS/TCS) or a person to whom a Unique Identity Number has been granted under rule 17 (Like Embassies), seeking cancellation of his registration under sub-section (1) of section 29 shall electronically submit an application in FORM GST REG-16, including therein:


The details of inputs held in stock or inputs contained in semi-finished or finished goods held in stock and of capital goods held in stock on the date from which the cancellation of registration is sought, liability thereon, the details of the payment, if any, made against such liability and may furnish, along with the application, relevant documents in support thereof, at the common portal within a period of thirty days of the occurrence of the event warranting the cancellation.


The proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted to cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of section 29 (discussed in subsequent section of the Post).


Note: On the Date from which the Cancellation of Registration is sought means Cancellation can be done from historical date also.


For Complete SOP on Process of Cancellation of Registration, Please read the Circular 69/43/2018.


Question: What can be the other Grounds for Cancellation of Registration even from Retrospective Date?


The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where


a. A registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed (Such Contraventions have been prescribed in Rule 21 as mentioned below)


b. A person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return. (Composition Dealer needs to file Annual Return in GSTR-4 for each Financial year by 30th April)


c. Any registered person, other than a person specified in clause (b), has not furnished returns for a such continuous tax period as may be prescribed (Prescribed in Rule 21 as explained below).


d. any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration


(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts.


Ground Prescribed in Rule-21


(a) Taxpayer does not conduct any business from the declared place of business.


(b) Taxpayer issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder; or


(c) violates the provisions of section 171 of the Act or the rules made thereunder. (Related to Anti-Profiteering)


(d) violates the provision of rule 10A (Related to Bank Account Details during Registration)


(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or


(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; (i.e. Tax Liability in GSTR-1 is more than what Tax Paid in GSTR-3B) or


(g) violates the provision of rule 86B. (Minimum 1% in Cash for specified Persons).


(h) being a registered person required to file return under subsection (1) of section 39 for each month or part thereof, has not furnished returns for a continuous period of six months; (Non Filing of GSTR-3B for continuous Six Months)


(i) being a registered person required to file return under proviso to subsection (1) of section 39 for each quarter or part thereof, has not furnished returns for a continuous period of two tax periods. (Where GSTR-3B is required to be filed quarterly & does not file for two quarter).


Note: Act does not permit cancellation of Registration for other faults of the Taxpayer like does not posses required records, Short-Payment of GST etc. for which penalty prescribed under Act can be imposed.


Note: During Proceedings of Cancellation of Registration, the registration may be suspended for such period. (For Complete details on Suspension of Registration, Please read at : Complete Details about Suspension of Registration).


Question: What Would be the Procedure for Cancellation of Registration by the Department for the reasons mentioned in previous Question?


Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled. (Tool of Opportunity of being heard).


The reply to the show cause notice issued under sub-rule (1) shall be furnished in FORM REG-18 within the period of seven working days.


The proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the the date of the reply to the show cause issued to cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of section 29.


Where Reply of the Taxpayer is satisfactory or where Taxpayer filed all his pending Returns and pay due GST along with interest and late fee, Proper Officer will drop the proceedings of cancellation.


Question: What would be the Consequences of the Cancellation of Registration


The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation. (like Audit of the Taxpayer was carried out after Cancellation of Registration).


Every registered person whose registration is cancelled shall pay an amount, by way of debit

in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed (Rule 44):


Further in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points (ITC Availed on such Capital Goods - ITC* No. of months Used/60) as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher. (Rule-44)


The Amount Payable under these provisions will be calculated under Rule-44.


Note: In our opinion, Here Law only requires for reversal of Credit of Inputs & Capital Goods not of Input Service even if they are used in manufacturing of such Finished Goods by the Factory.


Note: Though in Section-29, Amount of ITC or Output Tax Payable on such Goods whichever is higher needs to be paid, however, in Rule-44 only method of calculation of ITC reversability has been provided. Therefore, in our opinion, part of the section which talks about Output tax payable is in-operative to that extent.


Question: What is the Calculation Methodology for reversal of ITC pertaining to Stocks & Capital Goods as on Date of Cancellation ?


Method of Calculation of Reversability of ITC under Rule-44


(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs.


(b) for capital goods held in stock, the input tax credit involved in the remaining useful life in

months shall be computed on pro-rata basis, taking the useful life as five years.


Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount based on the prevailing market price of the goods on the effective date of the Cancellation of Registration. The same shall be duly certified by a practicing chartered accountant or cost accountant.


The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GSTR-10 (Final Return).


Question: What are the Provisions Regarding Final Return ?


As per Section 45, Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed. (i.e. GSTR-10).


Here, it is to noted that Final Return is only required to be filed by the Taxpayers who are filing return in Section 39(1). Therefore, Taxpayers like ISD, TDS/TCS, Composition Dealer etc. need not file Final Return.


Question: What would happen to Balance in Cash Ledger & Credit Ledger after all Payments including related to Stocks as on date of Cancellation in Final Return ?


Cash Ledger


Balance in Cash Ledger can be refunded in terms of Section 49(6) read with Section 54 & Rule-89.


Credit Ledger


As per Section-54, only in two circumstances (Inverted Duty Structure & Zero Rated Supplies) refund of unutilised ITC has been allowed. Accordingly, Balance in ITC Ledger will not be available for refund.


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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.





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Circular No. 69/43/2018-GST

Subject: Processing of Applications for Cancellation of Registration submitted in FORM GST REG-16 - Reg. F. No. CBEC/20/16/04/2018-GST Government of India Ministry of Finance Department of Revenue Cen

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