Cancellation of GST registration

Often considered as an indirect tax for the whole nation that would make India one unified common market. GST is a tax which is imposed on the sale, manufacturing and the usage of the goods and services. It is a single tax that is imposed on the supply of the goods and services, right from the manufacturer to the customer. The credits of the input taxes that are paid at each stage will thus be available in the subsequent stage of value addition which however makes GST essentially a tax only on the value addition on each stage. GST is charged at the same rate at the national level on the similar products and it also replaces almost all the current indirect taxes that are imposed by the Centre and the States government. GST is a consumption based tax which is paid at the point of sale (final stage).

Situations under which GST cancellation can be done are:

  • Business Shuts down: When the business has been discontinued or transferred fully for any reason including death of the proprietor, amalgamation with other legal entity, merged or disposed.
  • Change in business form: When there is any change in the constitution of the business (e.g. Move from partnership to Pvt. Ltd.)
  • Exempt from GST: When the taxable person, is no longer liable to be registered under the GST Laws.
  • Improper place: Does not conduct any business from the declared place of business.
  • Violation: Issues invoice or bill without supply of goods or services in violation of the provisions of this Act.

Who can cancel GST Registration?

Cancellation of GST Registration can be done under following circumstances:

  • A registered person violates the Act or any rules under it.
  • A person under the Composition Scheme who doesn’t furnish returns for 3 consecutive tax periods.
  • Any registered person who doesn’t furnish returns for a continuous period of 6 months.
  • Any person who takes voluntary registration but doesn’t start business within 6 months from the date of registration.
  • Registration has been obtained by illegal means, i.e. fraud, willful misstatement or suppression of facts.

Process to cancellation of GST registration

  • Fill form GST REG-16 application for cancellation of registration with following details:
    • Inputs and capital goods held in stock on the date from which cancellation of registration is sought.
    • Liability as on that date.
    • Details of the payment, if any, made against such liability.
  • Within 7 days, fill form GST REG-17 to show cause notice.
  • If show cause hearing is successful, then under form GST REG-16 order to cancel registration is done.

Exception: In case of voluntary registration, no application will be considered in case of a taxable person within 1 year from registration.

Consequences of cancellation of GST registration


Mandatory amount i.e, payable on cancellation:

  • Reversing the input tax credit in raw materials in stock and inputs in semi-finished/finished goods held in stock on the day immediately preceding the date of cancellation                                                                                                                                                                    OR
  • paying the output tax payable on such goods,
    -whichever is higher

For capital goods, the taxable person shall pay:

  • The input tax credit taken on the said capital goods reduced by a certain percentage (will be notified later)                                                                                             OR
  • The tax on the transaction values of such capital goods
    – whichever is higher

Revocation of cancellation of GST registration order:

  • This is applicable only when the tax officer has cancelled the registration of a taxable person on his own motion. It does not apply to cases where there has been an application for cancellation. Such taxable person can apply to the officer for revocation of cancellation within thirty days from the date of the cancellation order.
  • The officer may accept the application to allow the person to continue with his registration. If he rejects it, then he must present a show cause notice and give the taxable person a reasonable opportunity of being heard.

In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.