GST Cancellation | Cancellation of Registration under GST

Who is Eligible for Cancellation of GST Registration?

Under the GST framework, multiple entities are eligible for the cancellation of GST Registration. The process can be initiated by the taxpayer voluntarily, by tax officers, or by legal heirs in the event of a taxpayer’s demise. The following entities are eligible:

Taxpayer Voluntary Cancellation

Businesses may opt for voluntary cancellation of their GST registration under various circumstances. If a business discontinues operations, it no longer requires GST registration and can apply for cancellation. Additionally, structural changes such as a merger, demerger, or transfer of business may lead to a new Permanent Account Number (PAN), necessitating fresh GST registration and cancellation of the old one. If a business initially registered under GST later finds that its turnover has fallen below the prescribed threshold and is no longer liable to be registered, it can apply for cancellation.

Cancellation by Tax Officials

The GST authorities have the power to cancel a taxpayer’s registration in cases of non-compliance. If a business fails to file GST returns for an extended period, authorities may initiate cancellation proceedings. Additionally, if the registration was obtained fraudulently using fake documents or misrepresentation, the authorities can revoke the registration to prevent misuse of the tax system. Businesses that violate GST rules, such as issuing invoices without supplying goods or services (fake invoicing), may also face cancellation by tax officials as part of regulatory enforcement.

GST Cancellation by Legal Heirs

In the case of a sole proprietorship, if the proprietor passes away, the legal heirs are responsible for managing the transition of the business, including its tax obligations. They can apply for GST cancellation on behalf of the deceased. Alternatively, if they wish to continue the business, they must obtain a fresh GST registration in their own name. This process ensures proper tax compliance and avoids legal complications regarding GST liabilities associated with the deceased proprietor’s business.

However, certain entities, such as tax deductors, tax collectors, and Unique Identity Number (UIN) holders (e.g., diplomatic missions), are not eligible for GST cancellation.

Conditions Under Which GST Registration Can Be Cancelled

The GST Act lays down clear conditions for the cancellation of GST registration. The primary reasons include:

Business Discontinuation

When a taxpayer permanently shuts down their business operations, they are no longer required to maintain a GST registration. Since GST registration is necessary for businesses involved in taxable supply, a closed business no longer has any GST obligations, such as filing returns, collecting taxes, or remitting payments to the government. In such cases, the taxpayer should formally apply for GST cancellation to avoid unnecessary compliance burdens, such as late fees or penalties for non-filing of returns after discontinuation. The cancellation process ensures that the business is removed from the GST database and is not liable for any further tax compliance.

Change in Business Structure

A business undergoing structural transformation often requires cancellation of the existing GST registration and obtaining a new one. This typically happens when a business changes its legal identity, such as an OPC converting into a private limited company or a partnership firm being restructured into an LLP. Since a new Permanent Account Number (PAN) is allotted to the new entity, the existing GST registration associated with the old PAN becomes invalid. To maintain tax compliance, the old registration must be cancelled, and a fresh GST registration should be obtained under the new business structure. Failure to do so can create complications in tax filings and compliance.

Voluntary Registration Withdrawal

Businesses that voluntarily register for GST, even if they do not meet the mandatory registration threshold, cannot apply for immediate cancellation. As per GST regulations, a voluntarily registered taxpayer must remain registered for at least one year before they are eligible to request cancellation. This restriction ensures that businesses do not misuse voluntary registration for short-term advantages, such as claiming input tax credit and then immediately opting out. If a voluntarily registered business finds that it no longer needs GST registration after completing one year, it can submit an application for cancellation through the GST portal.

Failure to File Returns

Regular taxpayers are required to file GST returns on a monthly or quarterly basis, depending on their turnover. If a taxpayer fails to file returns for six consecutive months, the GST authorities have the power to initiate the cancellation process. Similarly, for businesses registered under the Composition Scheme, failure to file returns for three consecutive tax periods (which is typically three quarters) can lead to cancellation proceedings. The government takes non-filing seriously as it disrupts tax compliance and revenue collection. Before initiating cancellation, the authorities may send notices to the taxpayer, giving them an opportunity to comply. If the taxpayer does not respond or regularize their filings, the registration may be cancelled, leading to additional penalties or liabilities.

Fraudulent Registration

GST authorities closely monitor tax registrations to prevent misuse of the system. If it is discovered that a business obtained GST registration using false documents, incorrect details, or fraudulent information, the registration is liable to be cancelled. Fraudulent registrations can include cases where a business provides incorrect business premises details, submits fake identity documents, or is created solely for issuing bogus invoices without actual business operations. In such instances, tax authorities can initiate immediate cancellation proceedings, and in severe cases, legal action may be taken against the business owner. This measure helps prevent tax evasion, fraudulent input tax credit claims, and financial losses to the government.

Each of these scenarios emphasizes the importance of maintaining accurate and compliant GST registration. Whether a business is closing, restructuring, or facing compliance issues, timely action on GST registration status helps avoid legal and financial complications.

Forms Used for GST Cancellation

Different forms are required for initiating and processing for the cancellation of GST Registration:

GST REG 16

GST REG 16 is the form used when a taxpayer voluntarily applies for GST cancellation. Businesses that discontinue operations, undergo structural changes, or are no longer liable for registration must submit this form on the GST portal. It requires details such as stock held, tax liabilities, and reason for cancellation.

GST REG 17

GST REG 17 is issued by tax officers when they find non-compliance or fraudulent activities in a taxpayer's account. It serves as a show-cause notice for cancellation, requiring the taxpayer to justify why their GST registration should not be cancelled. The taxpayer must respond within the specified timeframe to avoid cancellation.

GST REG 18

GST REG 18 allows taxpayers to reply to a show-cause notice issued via GST REG 17. Taxpayers must submit a proper explanation along with supporting documents to prove their compliance and prevent GST cancellation. Failure to respond or provide valid reasons may lead to final cancellation of the GST registration by tax authorities.

GST REG 19

GST REG 19 is issued by tax officers when they officially confirm and finalize the GST registration cancellation. This form provides details such as the effective date of cancellation and reasons for termination. Once this order is issued, the taxpayer is legally exempt from GST compliance unless they re-register in the future.

GST REG 20

GST REG 20 is used when tax officers decide to revoke GST cancellation proceedings. If a taxpayer successfully justifies their case using GST REG 18, the authorities may issue this form to restore their GST registration. This allows businesses to continue operations without requiring a new registration.

Required Information for Filing GST Cancellation

When applying for GST cancellation, taxpayers must provide specific details in Form GST REG-16 to ensure a smooth processing of their request. The form requires essential contact information, including the taxpayer’s mobile number and email address, to facilitate communication regarding the cancellation process. A taxpayer must also clearly mention the grounds for cancellation, such as discontinuation of business, turnover falling below the threshold limit, or a change in business structure leading to a new PAN. Additionally, the desired cancellation date must be specified to determine from when the business will no longer be liable for GST compliance.

Taxpayers must declare the value of stock, including inputs, semi-finished goods, and finished goods, along with the tax payable on these goods at the time of cancellation. This ensures that any remaining GST liability is properly accounted for before deregistration. If the business is undergoing a transfer, merger, or amalgamation, the entity receiving the business must be disclosed in GST REG-16, ensuring that GST responsibilities are transferred correctly. Finally, the taxpayer must provide details of their last GST return filed, including the ARN (Acknowledgment Reference Number), to confirm that all past compliance requirements have been met before requesting cancellation.

Payment Requirements for GST Cancellation

Before completing GST cancellation, businesses must settle any pending tax liabilities, which include payments related to stock and capital goods. The tax authorities require businesses to pay the higher of two amounts: the input tax credit (ITC) contained in the remaining stock of inputs, semi-finished goods, and capital goods or the output tax liability on the existing stock. This ensures that any potential tax revenue loss is recovered before cancellation is granted.

The required tax payment is typically made by debiting the electronic cash or credit ledger, where businesses maintain their GST payments and credits. If any outstanding dues exist at the time of cancellation, they must be cleared before the taxpayer can file their final return, GSTR-10. This final return serves as proof that all tax liabilities, including any adjustments for stock, have been settled. Failure to complete these payments can result in complications in the cancellation process, and the taxpayer may face legal action or penalties from the tax authorities. Proper compliance with these requirements ensures that businesses exit the GST system without any pending tax obligations.

How to Cancel GST Registration? - Step-by-Step Process

Follow these steps to cancel GST registration online:

1. Visit GST Portal:

To begin the GST cancellation process, go to the official GST website at www.gst.gov.in. This is the official online platform for GST-related services in India, including registration, return filing, and cancellation. Ensure you have a stable internet connection and a secure device before proceeding.

2. Log in:

Once on the GST portal, click on the "Login" button and enter your username, password, and captcha code to access your dashboard. If you have forgotten your login credentials, you can reset them using the "Forgot Username" or "Forgot Password" options. After successful login, you will be directed to your GST dashboard, where all tax-related activities can be managed.

3. Initiate Cancellation:

On the dashboard, navigate to the ‘Services’ tab in the top menu. Under this section, click on ‘Application for Cancellation of Registration’. This will open a new page where the cancellation form (GST REG-16) is available for submission.

4. Fill Basic Details:

The form will display pre-filled business details such as GSTIN (Goods and Services Tax Identification Number), legal name, trade name, and address. Carefully review these details to ensure accuracy. If needed, update the address for future correspondence to ensure you receive any further communications from the GST department.

5. Provide Cancellation Details:

In this section, select the reason for cancellation from the available dropdown list. Common reasons include:

• Discontinuation of business
• Turnover falling below the GST registration threshold
• Change in business structure (e.g., proprietorship converting into a private limited company, requiring a new GSTIN)
• Business transfer due to merger, demerger, or amalgamation

Additionally, the form requires details on pending tax liabilities, stock details, and final return filings. If applicable, enter the necessary tax payments to clear any outstanding liabilities.

6. Verification:

To complete the cancellation request, you need to verify the details provided:

• Select the authorized signatory from the dropdown list (typically the business owner or director).
• Enter the place of declaration, which is the city or location from where the cancellation request is being filed.
• Sign the form using either a Digital Signature Certificate (DSC) (mandatory for companies and LLPs) or an Electronic Verification Code (EVC) (for other taxpayers).

7. Submit the Form:

After successful verification, click the "Submit" button. The system will process your application and generate an Application Reference Number (ARN). This ARN is an acknowledgment of your request and can be used for tracking the status of your application.

8. Track Application Status:

After submission, you can monitor the progress of your cancellation request by logging into the GST portal and navigating to the ‘Track Application Status’ section. Enter the ARN number to view the current status of your application. If the authorities require any additional documents or clarification, they may notify you via email or the GST portal.

9. Receive Confirmation:

Once your application is reviewed and approved by the tax officer, you will receive a confirmation message on your registered email ID and mobile number. The system will also update the status on the GST portal, confirming that your GST registration has been successfully cancelled. The cancellation order will be issued in Form GST REG-19, and you should download and keep a copy for future reference.

By following these steps carefully, businesses can ensure a smooth and hassle-free cancellation process, avoiding any compliance issues with GST authorities.

Final GST Return (GSTR-10) – Importance and Consequences of Non-Filing

When a taxpayer's GST registration is cancelled, they are legally required to file GSTR-10, the Final Return, within three months from the date of cancellation. This return serves as a compliance measure to ensure that all pending tax liabilities, input tax credit (ITC) adjustments, and outstanding dues are settled before the taxpayer is fully deregistered from the GST system. GSTR-10 acts as the last declaration of tax obligations, confirming that the business has no remaining liabilities.

If the taxpayer fails to file GSTR-10 within the prescribed time, the GST department will issue a notice in Form GSTR-3A, reminding them to file the return within 15 days. This notice serves as a final warning, urging the taxpayer to comply with the filing requirement. If the taxpayer still does not respond or file the return within the given timeframe, the authorities will initiate assessment proceedings under Section 62 of the CGST Act, determining tax dues based on available records. This may result in penalties, late fees, or even legal actions.

To avoid complications, businesses must ensure timely filing of GSTR-10, preventing unnecessary penalties and ensuring a smooth exit from the GST system.

Grounds for Non-Acceptance of a GST Cancellation Application

A GST officer has the authority to reject a cancellation application if the request does not meet the prescribed conditions or contains discrepancies. Businesses seeking cancellation must ensure that their application is correctly filled, supported by the required documents, and adheres to GST regulations. If the application is found to be incomplete or misleading, the tax officer may refuse to process it, leading to delays and compliance issues for the taxpayer.

One of the primary reasons for non-acceptance of a GST cancellation application is the submission of incomplete or incorrect details. If the application lacks essential information such as the reason for cancellation, stock details, or proper supporting documents, it may be rejected. Any mismatch in taxpayer details, such as discrepancies in the business name, GSTIN, or tax liability calculations, can also lead to rejection. The application must clearly mention the final tax obligations, outstanding dues, and method of settlement to avoid non-acceptance.

Another reason for rejection is when a business is merged, transferred, or amalgamated but the new entity has not obtained a fresh GST registration. When a business undergoes a structural change, such as a proprietorship converting into a private limited company or merging with another firm, the new business must register under GST before the existing registration can be cancelled. If this requirement is not fulfilled, the cancellation request may be rejected since the tax authorities need to track the continuity of tax liabilities under the new business structure.

If a GST cancellation request is not accepted, the applicant will receive a show-cause notice from the GST officer, requiring them to respond within seven days. This notice will highlight the reasons for rejection and provide the applicant an opportunity to correct the errors or provide additional documents. If the taxpayer fails to respond within the stipulated time, the GST officer may officially reject the application and record the reasons for non-acceptance.

To prevent rejection, taxpayers should ensure accuracy in their application, provide all necessary documents, and comply with tax regulations, making the cancellation process smooth and hassle-free.