GST Cancellation / GST Surrender

GST Cancellation / GST Surrender is the process of closure of GST Number, it is required in closure of business. Sometimes GST Officer carries out GST Cancellation / GST Surrender if GST Return was not filed for consecutive periods.

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Comprehensive Guide on GST Cancellation or Surrender in India

1. Introduction

Goods and Services Tax (GST) registration is mandatory for businesses meeting the prescribed turnover limits or falling under specific categories. However, there are circumstances where a taxpayer may need to cancel or surrender their GST registration. This guide provides a detailed understanding of GST cancellation, including voluntary surrender by the taxpayer and cancellation initiated by tax authorities.

2. Reasons for GST Cancellation

GST cancellation can occur in two ways:

2.1 GST Cancellation by Taxpayer

A taxpayer can voluntarily apply for GST cancellation under the following conditions:

Discontinuation or Closure of Business – When the business ceases operations permanently.
Transfer, Amalgamation, or Merger – If the business is transferred to another entity due to a merger or acquisition.
Change in Business Constitution – If a business undergoes restructuring leading to a new Permanent Account Number (PAN).
Not Crossing the Threshold Limit – If a business’s turnover falls below the prescribed limit and does not require mandatory GST registration.

2.2 GST Cancellation by Tax Officer

A tax officer may initiate cancellation of GST registration under the following circumstances:

Contravention of GST Provisions – If the taxpayer violates GST laws or rules.
Failure to File Returns – If a taxpayer fails to furnish returns for six consecutive months (for regular taxpayers) or three consecutive tax periods (for composition scheme taxpayers).
Non-Commencement of Business – If a taxpayer who registered voluntarily does not commence business within six months.
Fraudulent Registration – If registration was obtained through fraud, wilful misstatement, or suppression of facts.

2.3 GST Inactive Status by Department

Sometimes, instead of outright cancellation, the GST department may mark a taxpayer’s registration as inactive if:

Returns are not filed for an extended period.
The department suspects non-compliance or fraud but has not completed an investigation.
There are discrepancies in tax filings that require clarification.

In such cases, the taxpayer must resolve compliance issues to restore active GST status or face eventual cancellation.

3. Procedure for GST Cancellation

3.1 Voluntary GST Cancellation by Taxpayer

A registered taxpayer can apply for cancellation through the GST portal by following these steps:

Log in to the GST Portal (www.gst.gov.in).
Navigate to Services > Registration > Application for Cancellation of Registration.
Provide the reason for cancellation and submit required details.
If the taxpayer has outstanding liabilities or input tax credit (ITC) on stock, Form GSTR-16 must be filed before cancellation.
The tax officer reviews the application and may issue a Show Cause Notice (GSTR-17) if further clarification is required.
The taxpayer must reply to the notice using Form GSTR-18 within seven days.
If satisfied, the tax officer will issue the Cancellation Order (GSTR-19).

3.2 GST Cancellation by Tax Officer

If a tax officer initiates cancellation:

A Show Cause Notice (GSTR-17) is issued.
The taxpayer must respond within seven days using Form GSTR-18.
If the response is unsatisfactory, the tax officer will proceed with cancellation and issue GSTR-19.

4. ITC Implications at the Time of GST Cancellation

When a GST registration is cancelled or surrendered, the taxpayer must address the Input Tax Credit (ITC) implications:

The taxpayer must reverse any ITC on stock, capital goods, and input services held at the time of cancellation.
The ITC reversal amount should be calculated as the higher of:
- ITC on stock (including raw materials, semi-finished, and finished goods) as per the latest balance sheet.
- 1% of the sale value of the stock.
If capital goods were purchased and ITC was claimed, the taxpayer must reverse ITC based on the proportionate life of the asset.
The final GSTR-10 (Final Return) must be filed within three months of cancellation to report ITC reversals and settle any outstanding tax liability.

Failure to reverse ITC or file the final return may lead to penalties and interest.

5. Revocation of GST Cancellation

If a taxpayer’s GST registration is cancelled by the tax officer, they can apply for revocation within 30 days using Form GSTR-21. However, revocation is only possible if:

The cancellation was not due to fraud or misrepresentation.
The taxpayer has filed all pending returns and cleared outstanding liabilities, including interest and late fees.

6. Impact of GST Cancellation

A business cannot charge GST on its supplies post-cancellation.
Any unused Input Tax Credit (ITC) in the electronic credit ledger will lapse.
The taxpayer is required to file final returns and settle any pending liabilities before closure.

With evolving tax regulations, staying compliant is essential. If you need assistance with GST cancellation or related services, professional support can ensure a seamless process. Stay updated with the latest GST regulations for smooth business operations.

For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.

7. Additional Resources

For further reading, explore the following topics:

GST Registration Process in India – Step-by-step guide on obtaining GST registration.
GST Returns Filing Guide – Detailed insights on monthly and annual GST filings.
GST LUT Filing Guide – Detailed Insights on Letter of Undertaking (LUT) Application, Eligibility, and Compliance.
GST Notices and How to Respond – Handling compliance issues effectively.

Frequently Asked questions on GST Cancellation/Surrender

General Information about GST Cancellation

1. What is GST cancellation?

GST cancellation refers to the process of terminating or revoking a Goods and Services Tax (GST) registration. Once cancelled, a business is no longer required to collect or pay GST, file returns, or claim input tax credit (ITC).

2. What is the difference between GST cancellation and suspension?

Cancellation: A permanent termination of GST registration. The GSTIN is deactivated, and the business is no longer considered a registered taxpayer. Suspension: A temporary deactivation of GST registration. The GSTIN is temporarily put on hold, and the business cannot conduct GST-related activities during the suspension period. Suspension can be revoked.

3. Why would a business cancel its GST registration?

A business might cancel its GST registration due to various reasons, including: Business closure or cessation of operations. Turnover falling below the threshold limit for GST registration. Change in the nature of business, making GST registration no longer required. Transfer of business ownership. Conversion of business structure (e.g., from proprietorship to company).

Process for GST Cancellation

4. How do I cancel my GST registration?

GST cancellation is done online through the GST portal (www.gst.gov.in).

5. What is the process for GST cancellation?

The process generally involves: Visiting the GST portal. Logging in to the GST account. Navigating to the “Registration” section and selecting “Application for Cancellation of Registration.” Filling out the online application form (Form GST REG-16). Providing the reason for cancellation. Uploading the required documents. Submitting the application.

6. What documents are required for GST cancellation?

Documents typically required include: Application in Form GST REG-16. Proof of closure of business (if applicable). Details of stock (if applicable). Details of ITC reversal (if applicable). Other documents as specified by the GST authorities.

7. When can I apply for GST cancellation?

You can apply for GST cancellation when: Your business has closed down. Your turnover has fallen below the threshold limit. You have changed your business structure. You are no longer liable to be registered under GST.

8. What is the time limit for applying for GST cancellation?

There is no specific time limit for applying for cancellation after the event triggering the cancellation (e.g., business closure). However, it’s advisable to apply promptly to avoid any future compliance issues.

9. What happens after I submit the GST cancellation application?

The GST authorities will verify the application and supporting documents. If everything is in order, they will approve the cancellation and issue a cancellation order. The GSTIN will be deactivated.

Post-Cancellation Formalities

10. What happens after my GST registration is cancelled?

After cancellation, you: Cannot collect GST from customers. Cannot claim ITC on purchases. Must file all pending GST returns. Must pay any outstanding GST dues. Should update your records and inform stakeholders about the cancellation.

11. Can I continue my business after cancelling GST registration?

Yes, you can continue your business if it doesn’t require GST registration (e.g., turnover below the threshold). However, you cannot conduct any GST-related activities.

12. Can I re-register for GST after cancellation?

Yes, you can re-register for GST if your business circumstances change and you become liable for registration again.

Other Considerations

13. What happens to my ITC after GST cancellation?

You may need to reverse any ITC claimed on stock held on the date of cancellation. The rules for ITC reversal can be complex; consult a tax professional.

14. What happens if I don’t cancel my GST registration when required?

Continuing to operate under a GSTIN after you are no longer liable for registration can lead to penalties and legal issues.

Indian Owner

Foreign Owner

Special Entities

Government Registrations

Return & Compliances

Conversion of Entities

Change Services

Closure of Entities