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2019

Tax Payer’s Liability in case of Voluntary Cancellation of Registration under GST

Tax Payers Liability in case of Voluntary Cancellation of Registration under GST

Sometimes a registered dealer may wish to cancel GST Registration on voluntary basis. In such scenario, some common confusion prevails among tax payers. For example..

  • Are we liable to file GST returns after applying for cancellation of GST registration on voluntary basis?
  • Whether there is a need to file GSTR after applying for voluntary cancellation of registration?
  • If there are any penalty for not filing GST Return in between the period of application and cancellation order?

Hence, in this article we will discuss certain points that may clear confusion in this regard.

Cases where Cancellation of Registration may be required:

A registered dealer may cancel GST Registration in following cases:

1. The business has been discontinued.
2. The business has been transferred fully, amalgamated, demerged or otherwise disposed — the transferee (or the new company from amalgamation/ demerger) has to get registered. The transferor will cancel its registration if it ceases to exist.
3. There is a change in the constitution of the business (For example Private limited company has changed to a public limited company).
4. If the person is not liable for GST registration due to income being less than the threshold turnover.
5. For voluntary registration undertaken even if income was less than the compulsory limit, then cancellation is possible only after a period of one year.
6. Death of Sole Proprietor.

FORM GST REG-16 – Application of Cancellation of Registration:

  • FORM GST REG-16:

As per Rule 20, a registered person, other than a person to whom a registration has been granted under rule 12 (Person required to TDS/TCS) or a person to whom a Unique Identity Number has been granted under rule 17, seeking cancellation of his registration under sub-section (1) of section 29 shall electronically submit an application in FORM GST REG-16.

  • Details to be provided:

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,
Tax Liability, the details of the payment, if any, made against such liability and may furnish, along with the application, relevant documents in support the aforesaid facts.

  • Time Limit:

Within a period of thirty days of the occurrence of the event warranting the cancellation, either directly or through a Facilitation Centre notified by the Commissioner.

  • FORM GST REG-19:

The proper officer has to issue an order for cancellation in FORM GST REG-19 within 30 days from date of application. The cancellation will be effective from a date determined by the officer and he will notify the taxable person.

Note: As stated above, the persons who are required to deduct or collect tax under GST or who have been allotted UIN cannot file cancellation of registration.

Suspension of Registration (Rule 21A):

  • Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.
  • Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after offering the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.
  • A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.
  • The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.

Details required for filing Application of Cancellation of Registration:

  • Address, Email-id and Registered Mobile Number.
  • Reason for cancellation and the desired date to cancel.
  • Particulars on which tax is payable: input available on semi-finished and finished goods, Stock of input and stock of capital. On filling the tax liability, you would be manually required to fill in the value.
  • You would be required to fill in either Electronic Cash ledger or Electronic Credit ledger to set off the tax liability.
  • Details of the last return filed by the Taxpayer.
  • When the existing unit is merged/de-merger/transferred, etc., then the details of registration of the entity, i.e., GSTIN on the transferee entity.

Payment of Pending Tax Liability:

On cancellation of your registration, you are expected to pay a sum which is higher of:

  • Input credit in the form of finished or raw goods stocked one day before the cancellation.

OR

  • Output Tax for the products as mentioned above.


When we come to capital and machinery costs, an amount is to be paid that is higher of:

  • A reduced percentage of the input credit of capital goods.

OR

  • Tax filed on the transaction value of these products.

Cancellation of Registration:

  • As per Rule 22 where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted under sub-rule (1) of rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule (1), 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.

Final Return:

  • Every person whose registration has been cancelled are required to file a final GST return in Form GSTR-10 within three months of the date of cancellation or the date of order of cancellation, whichever is later.
  • This is done to ensure that the taxpayer is devoid of liabilities which could have been incurred under Section 29 of the CGST Act.
  • It may be noted that Input Service Distributors or non-resident taxpayers who are required to pay tax under section 10, section 51 or section 52 are exempted from this provision.
  • If the final return isn’t filed in Form GSTR-10, the taxpayer will be issued a notice in GSTR-3A, prompting him/her to do the same within 15 days of the issue of such notice.
  • If the taxpayer fails to comply with the notice, initiatives will be taken to assess the liability of the taxpayer based on the information available with the concerned officer.
  • The assessing order will be withdrawn if the applicant files the return within 30 days of the issue of notice. However, the taxpayer wouldn’t be reprieved of remitting the late fee and interest.

Forms related to Cancellation of Registration:

Form Purpose
Form GST REG 16 Cancellation by a registered individual.
Form GST REG 17 Issue show cause notice for cancellation.
Form GST REG 18 Reply to show cause notice / Explanation form to stay proceedings.
Form GST REG 19 Order for dissolution.
Form GST REG 20 To stop the cancellation proceedings.
Form GST REG 21 Application for revoking the cancellation.
Form GST REG 22 Order revoking the cancellation.


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