Cancellation of GST Registration means the permanent closure of the GSTIN in some circumstances such as closure/transfer/change in constitution of the business etc. and it can be applied by filing an application on the GST Portal and by the Proper officer Suo-moto in the circumstances such as non-filing of returns, fraud, contravention of provisions of the Act etc.
A registered Taxpayer can file an application for cancellation of GST registration on the occurrence of any of the following events:
1. Discontinuance of business or closure of business.
2. Taxable person ceases to be liable to pay tax.
3. Transfer of business on account of amalgamation, merger, de-merger, sale, leased or otherwise.
4. Change in constitution of business leading to change in PAN.
5. Registered voluntarily, but did not commence any business within specified time.
6. Taxable person no longer liable to be registered under GST Act.
7. Death of sole proprietor
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.
Where the registration is cancelled, the registered taxable person shall pay an amount 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 on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher.
The payment can be made by way of debit in the electronic credit or electronic cash ledger. In case of capital goods, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by the prescribed percentage points or the tax on the transaction value of such capital goods, whichever is higher. The amount payable under these provisions shall be calculated in accordance with rule 44 of CGST Rules.
Given below are the consequences of the cancellation of GST registration –
In terms of Section 29(2) of the Central Goods and Services Tax Act, the proper officer is empowered to cancel the registration from any such date as he may deem fit including from any retrospective date. The exercise of powers to cancel the registration ab initio must be based on material on record and some rationale. Further, the taxable person must be put to notice of the proposed action to cancel the registration from a retrospective date to provide an opportunity to the said person.
Now, let’s have a look at the complete cases published in taxscan.in relating to retrospective cancellation of GST registration.
The Delhi High Court quashed the show cause notice ( SCN ) as there was no specific mentioning of retrospective cancelling of GST Registration in it.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “We notice that the impugned Show Cause Notice and the impugned order are also bereft of any details and accordingly the same cannot be sustained. Neither the impugned Show Cause Notice, nor the impugned order spell out the reasons for retrospective cancellation.”
“Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted” the Court added.
In a recent case, the Delhi High Court while modifying the retrospectively cancelled Goods and Service Tax ( GST ) registration held that no opportunity was given to the petitioner for objecting to the retrospectively cancelled GST registration. Further the bench clarified that Respondents are not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
After analyzing the facts and arguments of both parties, a division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modifying the retrospectively cancelled Goods and Service Tax ( GST ) registration and observed that no opportunity was given to the petitioner for objecting to the retrospectively cancelled GST registration.
The Delhi High Court set aside the order cancelling Goods and Service Tax ( GST ) registration as the department failed to issue a notice regarding retrospective Cancellation. The bench observed that when the petitioner did not submit a reply, the proper officer recorded that the reply of the petitioner had been considered and at the stage when the petitioner did submit a reply, the Proper Officer recorded that no reply was filed.
Justice Sanjeev Sachdeva And Justice Ravinder Dudeja noted that there appears to be complete non-application of mind. At the stage when the petitioner did not submit a reply, the proper officer has recorded that the reply of the petitioner has been considered and at the stage when the petitioner did submit a reply, the Proper Officer has recorded that no reply was filed. The court set aside the Show Cause Notices and the consequent order. The GST registration of the petitioner is restored.
The Delhi High Court set aside retrospective cancellation of Goods and Service Tax ( GST ) registration. The show cause notice is ex facie defective as the same does not contain any details or quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons.
Since both the petitioner and the respondent want the GST registration to be cancelled, though, for different reasons, the division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modified the order of cancellation to the extent that the same shall operate with effect from 01.02.2021, i.e., the date on which the petitioner discontinued business.
The Court held that the respondent shall be at liberty to issue a proper Show Cause Notice to the petitioner with regard to the alleged wrongful claim of Input Tax Credit by the petitioner by law. Further, the petitioner shall also comply with the requirements of Section 29(3) of the Central Goods and Services Act, 2007.
n a recent case, the Delhi High Court while modifying the cancellation order observed that the respondent did not provide opportunity to the petitioner to object to retrospective cancellation of Goods and Service Tax ( GST ) registration.
The court during the adjudication noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons. Therefore the Petitioner does not seek to carry on business or continue with the registration, Accordingly the division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modified to the limited extent that registration shall now be treated as cancelled with effect from 18.11.2021 i.e., the date when Sh. Dershan Kapoor passed away.
The Delhi High Court has ruled that merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
Justice Sanjeev Sachdeva and Justice Ravinder Dudeja stated that “Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.”
In light of these considerations, the court modified the cancellation order, determining that it shall operate with effect from 01.02.2019, aligning with the date of the petitioner’s business discontinuation. The petitioner was directed to furnish necessary details for a comprehensive assessment by the respondents, who are not precluded from taking lawful steps for tax, penalty, or interest recovery.
The Delhi High Court modified the retrospective cancellation of GST registration in the case of Gaurav Bansal, who challenged the order dated July 28, 2021, which canceled the GST registration retrospectively from November 15, 2017.
The Division Bench of Justice Sanjeev Sachdeva and Ravinder Dudeja observed that, “a taxpayer’s registration can be canceled with retrospective effect only where such consequences are intended and are warranted.” It was also noted by the Delhi High Court bench that, “according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period.”
In a recent case, the Delhi High Court, while directing the cancellation of Goods and Service Tax (GST) registration from 08.02.2021, observed that the revenue did not provide the petitioner with an opportunity to contest the cancellation with retrospective effect.
The court noted that the order lacked reasons for the retrospective cancellation from 01.01.2019, and the SCN did not specify the proposed retrospective cancellation date. Consequently, the petitioner had no opportunity to contest the retrospective cancellation.
Despite being open to prospective cancellation, the petitioner had no reason to contest the SCN. After analyzing both parties’ facts and arguments, a division bench of Justice Vibhu Bakhru and Justice Anoop Kumar Mendiratta directed the effective date of cancellation to be 08.02.2021. The bench clarified that if the respondents seek retrospective cancellation before this date, a show cause notice must be issued, stating reasons and allowing the petitioner a fair opportunity to be heard.
In a significant case, the Delhi High Court while observing the cancellation of GST registration of V-Belt trading modified the retrospectively cancelled the GST registration.
Furthermore the division bench observed that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason. The Petitioner does not seek to carry on business or continue the registration Therefore the division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja, held that the cancelation order dated 11.11.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 07.10.2022.
A Division Bench of the Delhi High court set aside the cancellation of the petitioner’s GST registration and instructed the GST department to amend the registration cancellation order to nullify the arbitrary exercise of retrospective cancellation.
In accordance with Section 29(2) of the Central Goods and Service Tax Act, 2017, the proper officer has the discretion to cancel the registration from any date including with retrospective effect. The court held that this discretion cannot be exercised in arbitrary manner, it must be based on some objective criteria. The bench observed that the order had been passed in violation of the principles of natural justice as the petitioner was not afforded any opportunity of being heard. The Delhi High Court Division Bench of Justice Amit Mahajan and Justice Vibhu Bakhru thus instructed the GST department to amend the cancellation order bearing retrospective cancellation of GST registration.
The Delhi High Court has held that Good and Services Tax ( GST ) registration cannot be cancelled merely because a taxpayer has not filed returns for some period. The Petitioner discontinued the business on the demise of the father of the Petitioner. The retrospective cancellation of the registration resulted in the denial of the Input Tax Credit for the said period.
A division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja noted that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason. Since the Petitioner does not seek to carry on business or continue the registration, the Court modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 14.08.2019 i.e., the date when the Show Cause Notice was issued.
The Delhi High Court ordered to cancel of the GST registration prospectively only since the department failed to mention the retrospective effect of cancellation of GST registration in the Show Cause Notice (SCN).
It was observed that it was evident that the show cause notice issued to the petitioner did not mention that the proper officer proposed to cancel the registration with retrospective effect. Thus, the petitioner had no opportunity to address any proposed action of cancellation of registration ab initio. A two judge bench comprising of Justice Vibhu Bakhru and Justice Amit Mahajan disposed of the petition with the direction that the cancellation of the petitioner’s GST registration would take effect from 11.12.2020 and not from 01.07.2017.
The Delhi High Court directed to decide revocation of cancelled GST Registration as there was discrepancy in input tax credit (ITC) claim due to cancellation of GST registration with retrospective effect.
A Division Bench of Justices Vibhu Bakhru and Amit Mahajan observed that “Discrepancy in the Input Tax Credit claimed by the petitioner was not the ground on which the petitioner’s GST registration was cancelled. The petitioner claims that it is handicapped in responding to the communication dated 04.09.2003, and reconciling the Input Tax Credit Claim for more than three financial years, in absence of full access to its GST Portal. This access is unavailable as the petitioner’s GST registration has been cancelled with retrospective effect.”
The Delhi High Court quashed the Retrospective Effect of Cancellation of Goods and Service Tax (GST) registration and directed to effect the cancellation only from the date of the closure of the premises of the assessee.
A division bench comprising Justice Vibhu Bakhru and Justice Tushar Rao Gedela directed that the cancellation of the petitioner’s GST registration shall take effect from 31.03.2022. However, this would not preclude the concerned authorities from instituting any proceeding if it is found that the petitioner has violated any provisions of the Statute or is liable to pay any tax, interest or liability.
In a recent decision, the Delhi High Court observed that GST registration cannot be cancelled with retrospective effect mechanically. The Petitioner impugned the order dated 04.11.2021, whereby the GST registration of the petitioner was cancelled retrospectively with effect from 10.07.2017 and also impugns Show Cause Notice dated 19.10.2021.
A Division Bench comprising Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.”
A Division Bench of the Calcutta High Court (HC) ruled that Input Tax Credit (ITC) cannot be Denied due to Cancellation of GST Registration with retrospective effect.
A Division Bench comprising Justice TS Sivagnanam and Justice SupratimBhattacharya observed that “In such circumstances, we are of the view that the directions issued by the Single Judge were not only in the interest of the respondents/writ petitioners, but also would safeguard the interest of the revenue.” “We say so, because the matter has been sent back to the appellant authority to enable verification of documents, correspondences exchanged between the Department and the respondents/writ petitioner which have been referred to as memo” the Court noted.
In a recent decision, a division bench of the Delhi High Court observed that Proper Officer should reach objective satisfaction before cancelling GST Registration retrospectively.
The Court of Justices Ravinder Dudeja and Sanjeev Sachdeva observed that “In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.”
In a major ruling a Single Bench of the Calcutta High Court ruled that the cancellation of Goods and Service Tax (GST) Registration with retrospective effect cannot be a ground to deny Input Tax Credit (ITC) from the supplier to the purchaser.
The Court of Justice Krishna Rao observed that “Admittedly at the time of transaction, the name of the supplier as registered taxable person was already available with the Government record and the petitioner has paid the amount of purchased articles as well as tax on the same through bank and not in cash.”
“This Court finds that without proper verification, it cannot be said that there was any failure on the part of the petitioner in compliance of any obligation required under the statute before entering into the transactions in question. The respondent authorities only taking into consideration of the cancellation of registration of the supplier with retrospective effect have rejected the claim of the petitioner without considering the documents relied by the petitioner” the Bench noted.
The Delhi High Court recently addressed a case wherein the petitioner contested the retrospective cancellation of their GST registration. The petitioner, operating under the name M/S Dashmesh Wires and Cables ( India ), engaged in the manufacturing of copper wire and cables. They regularly filed GST returns and claimed input tax credit ( ITC ) via the GST Portal.
Highlighting the importance of objective criteria in cancellation decisions, the Delhi court emphasised that the cancellation with retrospective effect should only occur if warranted by specific circumstances, not merely due to non-compliance with return filing. The bench also addressed the potential consequences of retrospective cancellation on the input tax credit of the petitioner’s customers, stressing the need for the proper officer to consider such implications before making a decision.
The Delhi High Court recently directed the Goods and Service Tax ( GST ) department to cancel the GST registration from the date of the death of the proprietor rather than retrospectively from the commencement of GST implementation on July 1, 2017 due to non-filing of GST Returns ( GSTR ).
The court observed that while Section 29(2) of the Act allows retrospective cancellation, such action must be based on objective criteria and not mere non-filing of returns. Additionally, retrospective cancellation has implications for customers’ input tax credit, thus necessitating careful consideration. It was noted that the SCN failed to indicate the possibility of retrospective cancellation, and both parties sought cancellation albeit for different reasons. The bench of Justices Sanjeev Sachdeva and Ravinder Dudeja, considering the petitioner’s intention to discontinue the business and registration, modified the order to cancel the registration effective from the date of the proprietor’s demise, March 14, 2018.
The Delhi High Court directed to cancel Goods and Service Tax ( GST ) Registration of a closed firm retrospectively with effect from issuance of the Show Cause Notice ( SCN ) and not from the date of July 1st 2017.
The bench noticed that the SCN and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the SCN, nor the order spell out the reasons for retrospective cancellation. Further, the said SCN also does not put the petitioner to notice that the registration was liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
The bench of Justice Sanjeev Sachdeva and Ravinder Dudeja concluded that an impugned order dated 14.02.2023 does not qualify as an order of cancellation of registration. On one hand, it was stated that the registration was liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. Accordingly, Petition was disposed of.
The Delhi High Court recently made a significant ruling regarding the cancellation of Goods and Services Tax ( GST ) registration, retroactively dating back to the issuance date of the Show Cause Notice ( SCN ). This decision came in response to a petition filed against the cancellation order dated August 22, 2023, which had retroactively cancelled the petitioner’s GST registration effective from July 1, 2017.
The bench emphasized that cancellation with retrospective effect should not be done mechanically but based on objective criteria. Mere non-filing of returns does not warrant retrospective cancellation. The court found the lack of details in the SCN and the cancellation order untenable. The division bench, comprising Justice Sajeev Sachdeva and Justice Ravinder Dudeja, modified the impugned order to cancel the registration retrospectively from the date of the SCN issuance, i.e., July 11, 2023, considering that the petitioner no longer intended to conduct business or maintain the registration.
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