In the recent case,the High Court of Madras called the cancellation of GST registration ‘capital punishment’ for traders. The court ordered the Goods and Services Tax ( GST ) department to simplify rules and send notices via SMS and in regional languages to better support small-scale entrepreneurs.
M.G.Exim,the petitioner-assessee contractor, did contract works for the Government and its agencies and was enrolled under the Central Goods and Service Tax Act, 2017. The GST registration was cancelled due to non- filing of returns for a period of six months.
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The counsel for the petitioner argued that, due to health issues, the petitioner relied on his accountant to file returns, but later discovered they were not filed on time. The appeal under Section 107 of the GST Act was not accepted due to the limitation period. The petitioner argued that canceling his GST registration harmed his livelihood and sought to have the order quashed.
The respondent’s counsel argued that the petitioner had ample opportunity to respond before his GST registration was canceled. A show cause notice was issued on 15.07.2022, which the petitioner ignored. The cancellation order was issued as the appeal was not filed within the limitation period.
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The court, on hearing both sides’ submissions, relied on the case of Suguna Cutpiece Vs Appellate Deputy Commissioner (ST) (GST) and others reported in 2022 (2) TMI 933 to assert that excluding petitioners from the GST regime served no useful purpose, as they continued their business activities.It emphasized that GST provisions should facilitate business operations, not hinder them.
The court noted that the Central Goods and Services Act, 2017, aimed to levy and collect tax on intra-state supplies and was not intended to restrict entrepreneurs’ rights. Denying the petitioner a GST registration would hinder their ability to raise bills, affecting employment opportunities and ultimately violating their right to livelihood under Article 21 of the Constitution. The petitioner must be allowed to continue their business and contribute to the State’s revenue.
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The court observed that under Section 211 of the Income Tax Act, 1961, non-payment of advance tax attracts interest, but no serious action is usually taken. In this case, however, the “capital punishment” of cancelling registration was imposed based on an English system-generated email, without notices in regional languages.
The bench stated that the petitioner, a government contractor, and many small-scale entrepreneurs are often uneducated and unfamiliar with email and technology. Despite providing email IDs during registration, most traders do not manage them and are unaware of the consequences of late returns. The department should issue notices in regional languages, via SMS, and registered post to ensure effective communication and avoid rendering notices a mere formality.
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The court stated that the government’s goal is to promote trade, not to restrict it. The current practice of canceling registrations acts as a “capital punishment” for small-scale entrepreneurs, halting their business, affecting salaries, and damaging long-term progress. The GST department should relax rules, issue notices via SMS, and in regional languages.The court expects the GST department to amend provisions to consider these consequences.
A single bench of Justice B.Pugalendhi disposed of the writ petition.
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