C. Reasons for GST Cancellation:

GST cancellation is the process of terminating a taxpayer’s registration under the GST regime. It involves applying for cancellation, verification by the GST authorities, and compliance with the necessary requirements. Cancelling GST registration is essential for businesses that no longer meet the criteria for registration or have ceased their operations to avoid non-compliance and penalties under GST laws.

GST should be cancelled under certain circumstances to ensure compliance with GST laws and regulations. Here are some scenarios in which GST cancellation may be necessary:

1. Ceasing Business Operations:

• If a business ceases its operations or discontinues its taxable activities, GST registration should be cancelled. This ensures that the taxpayer is no longer liable to comply with GST laws and regulations.

2. Change in Business Structure:

• In case of a change in the legal structure of the business, such as conversion from a partnership to a company or merger with another entity, GST registration may need to be cancelled.

3. Transfer of Business:

• If a business is sold, transferred, or amalgamated with another entity, the existing GST registration may need to be cancelled, and the new entity may need to obtain a fresh registration.

4. Turnover Falls Below Threshold:

• If the turnover of a registered taxpayer falls below the threshold limit for GST registration (currently ₹40 lakhs for goods suppliers and ₹20 lakhs for service providers), they may opt for cancellation of GST registration.

5. No Longer Liable for GST:

• If a taxpayer was mistakenly registered for GST or was incorrectly required to register due to a misunderstanding of the law, they may apply for cancellation of GST registration.

GST should be cancelled when a taxpayer’s business operations cease, there is a change in the legal structure or ownership of the business, turnover falls below the threshold limit, or there is no longer a requirement for GST registration. It’s essential for taxpayers to adhere to the prescribed procedures for GST cancellation to avoid penalties and ensure compliance with GST laws.

D. WAYS BY WHICH GST CAN BE CANCELLED:

GST cancellation can be initiated through the online portal provided by the Goods and Services Tax Network (GSTN). There are primarily two ways by which GST can be cancelled:

1. Voluntary Cancellation:

• Self-Initiated: Taxpayers can voluntarily apply for GST cancellation through the GST portal if they no longer meet the criteria for registration. Reasons for voluntary cancellation may include cessation of business operations, sale of business, or turnover falling below the threshold for registration.
• Form GST REG-16: Taxpayers need to fill out Form GST REG-16 (Application for Cancellation of Registration) with accurate details and submit it online through the GST portal. Supporting documents, such as proof of closure of business or no liability, may need to be provided.
• Verification and Approval: The GST authorities will verify the application for cancellation and, if everything is in order, approve the cancellation request.
• Issuance of Cancellation Certificate: Upon approval, the GST authorities will issue a cancellation certificate to the taxpayer confirming the cancellation of GST registration.

2. Cancellation by Tax Authorities:

• Initiated by Authorities: In certain cases, the GST authorities may initiate cancellation of GST registration if they find that the taxpayer is no longer eligible for registration or has contravened GST laws.
• Show Cause Notice: The tax authorities may issue a show cause notice to the taxpayer explaining the reasons for proposed cancellation and providing an opportunity to respond.
• Cancellation Order: If the taxpayer’s response is found unsatisfactory or if they fail to respond within the specified period, the tax authorities may issue a cancellation order canceling the GST registration.

GST cancellation can be initiated either voluntarily by the taxpayer through self-initiated application on the GST portal or by the tax authorities based on non-compliance or ineligibility. Regardless of the method, taxpayers must ensure compliance with the prescribed procedures and requirements for GST cancellation to avoid any penalties or legal consequences.

E. STEPS INVOLVED IN GST CANCELLATION:

The process of GST cancellation involves several steps to ensure compliance with GST laws and regulations. Here are the general steps involved in GST cancellation:

Steps for GST Cancellation:

1. Review Eligibility:

• Review whether your business is eligible for GST cancellation based on criteria such as cessation of business operations, sale of business, or turnover falling below the threshold for registration.

2. Prepare Supporting Documents:

• Gather the necessary documents required for GST cancellation, such as proof of closure of business, copies of final GST returns, details of stock, and proof of no liability.

3. File Application for Cancellation:

• Fill out Form GST REG-16 (Application for Cancellation of Registration) accurately with the required details.
• Submit the application along with supporting documents to the appropriate GST authority online through the GST portal.

4. Verification by GST Authorities:

• The GST authorities will verify the application for cancellation and the supporting documents submitted.
• They may seek additional information or documents if required.

5. Issue of Acknowledgment:

• Once the application is submitted, an acknowledgment for the same will be generated on the GST portal.

6. Processing of Application:

• The GST authorities will process the application for cancellation and review the information provided.
• If everything is in order and meets the requirements, the cancellation request will be approved.

7. Issuance of Cancellation Certificate:

• Upon approval, the GST authorities will issue a cancellation certificate to the taxpayer confirming the cancellation of GST registration.

8. Filing Final Return:

• File the final GST return (GSTR-10) within a specified period from the date of cancellation.
• Provide details of stock held at the time of cancellation, if applicable.

9. Closure of Compliance:

• Ensure that all compliance requirements, including filing of final return and settlement of dues, are completed.
• Verify that there are no outstanding liabilities or dues with the tax authorities.

10. Closure of GST Registration:

• Once all compliance requirements are fulfilled, the GST registration will be canceled, and the taxpayer will be removed from the GST database.

The process of GST cancellation involves steps such as preparing supporting documents, filing the application for cancellation, verification by GST authorities, issuance of cancellation certificate, filing final return, and closure of compliance. It’s essential to follow these steps diligently to ensure a smooth cancellation process and avoid any non-compliance issues with GST laws.

F. PENALTY IN CASE OF NON-CANCELLATION OF GST:

Under the Goods and Services Tax (GST) regime in India, there are certain penalties associated with GST cancellation, especially in cases of non-compliance or incorrect procedures. Here are the main penalties that may apply in the context of GST cancellation:

1. Late Cancellation Penalty:

• Late Fee: If a taxpayer fails to apply for cancellation of GST registration within the prescribed time frame after ceasing business operations or becoming ineligible for registration, they may be liable to pay a late fee.
• Amount: The late fee for delayed cancellation is ₹10,000 or an amount equivalent to the tax liability, whichever is higher.

2. Non-Compliance Penalties:

• Incorrect Information: Providing incorrect information or documents during the cancellation process may lead to penalties.
• False Declarations: Making false declarations or misrepresenting facts to obtain cancellation may result in penalties under GST laws.

3. Continued Liability:

• Ongoing Liability: Even after the cancellation of GST registration, taxpayers may still be liable for any taxes, penalties, or dues arising from transactions conducted before the cancellation.

4. Recovery of Dues:

• Recovery Proceedings: The tax authorities may initiate recovery proceedings to collect any outstanding taxes, penalties, or dues from the taxpayer after cancellation of GST registration.

5. Legal Consequences:

• Prosecution: In severe cases of non-compliance or deliberate evasion, the tax authorities may initiate prosecution proceedings against the taxpayer, which can result in fines or imprisonment.

Penalties for GST cancellation primarily revolve around late cancellation, non-compliance, continued liability, recovery of dues, and legal consequences. Taxpayers are advised to adhere to the prescribed procedures and timelines for GST cancellation to avoid penalties and ensure compliance with GST laws. If there are genuine reasons for delay or non-compliance, taxpayers should communicate with the tax authorities and take appropriate steps to rectify the situation to minimize penalties.

G. WHO ARE NOT ELIGIBLE TO CANCEL GST REGISTRATION:

Certain categories of taxpayers may not be eligible to cancel their GST registration under specific circumstances. Here are some scenarios where GST registration cancellation may not be permitted:

1. Pending Proceedings:

• Taxpayers who are under investigation, audit, or assessment by the tax authorities may not be allowed to cancel their GST registration until the proceedings are concluded.

2. Outstanding Dues:

• Taxpayers with outstanding tax dues or liabilities, including penalties or interest, may not be permitted to cancel their GST registration until the dues are cleared.

3. Input Tax Credit (ITC) Reversal:

• Taxpayers who have claimed input tax credit (ITC) on capital goods or inputs and have not completed the required period for ITC reversal may not be eligible to cancel their GST registration until the reversal is done.

4. Composition Scheme Opt-Out Period:

• Taxpayers registered under the composition scheme may not be allowed to cancel their GST registration during the specified opt-out period, which is usually one year from the date of opting into the scheme.

5. Mandatory Registration:

• Taxpayers who are mandatorily required to be registered under GST laws, such as interstate suppliers, e-commerce operators, or those making taxable supplies of goods or services above the prescribed threshold, may not be permitted to cancel their registration.

While most taxpayers can cancel their GST registration under certain circumstances, there are restrictions and conditions that may prevent cancellation in specific situations. Taxpayers should review their eligibility and ensure compliance with GST laws before applying for cancellation of registration. It’s advisable to consult with a tax professional or seek guidance from the GST authorities if there are any doubts or uncertainties regarding the cancellation process.