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GST Registration Cancellation and Problems faced while cancellation
Team SoOLEGAL 7 Apr 2023

GST Registration Cancellation and Problems faced while cancellation

The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the manufacture, sale, and consumption of goods and services across India. The GST was implemented in July 2017 that has brought about significant changes in the country's taxation system. However, in certain situations, the cancellation of GST registration becomes necessary. This article will cover the legal process for the cancellation of GST and the reasons for the same.

Reasons for the Cancellation of GST Registration

There are several reasons for the cancellation of GST registration. They are as follows:

1.     Voluntary Cancellation: A taxpayer can opt for voluntary cancellation of GST registration if the registered entity is not operating its business anymore or if the business has been closed permanently.

2.     Non-Filing of Returns: If a registered entity has not filed its GST returns for a continuous period of six months, the GST registration can be canceled by the authorities.

3.     Composition Scheme Violation: If a registered entity has violated the conditions of the composition scheme, the GST registration can be canceled.

4.     Business Transfers: In case of a transfer of the business to another entity, the registered entity's GST registration can be canceled.

5.     Illegal Activities: If a registered entity is involved in any illegal activities, the authorities can cancel the GST registration.

Legal Process for Cancellation of GST Registration

The legal process for the cancellation of GST registration involves the following steps:

1.     Apply for Cancellation: The registered entity must apply for the cancellation of its GST registration in Form GST REG-16.

2.     Verification: The GST authorities will verify the application and may ask for additional documents, if required.

3.     Order of Cancellation: After verifying the application, the GST authorities will pass an order of cancellation of GST registration in Form GST REG-19.

4.     Surrender Certificate: Once the order of cancellation is passed, the registered entity must surrender its GST registration certificate.

5.     Final Return Filing: The registered entity must file the final GST return within three months of the cancellation order.

Impact of Cancellation of GST Registration

The cancellation of GST registration has several implications, such as:

1.     Ineligibility to Collect GST: The registered entity cannot collect GST from its customers once the registration is canceled.

2.     Loss of Input Tax Credit: The registered entity cannot claim input tax credit on any goods or services purchased after the cancellation of GST registration.

3.     Liability for Tax Payment: The registered entity will be liable to pay any outstanding tax liability or penalties, even after the cancellation of GST registration.

Problems faced while surrendering the GST

Surrendering GST registration can be a cumbersome process for businesses, as assessee may face several challenges while doing so. Here are some of the common problems faced during the surrendering of GST registration:

1.     Delay in Processing: One of the significant problems businesses face while surrendering GST registration is the delay in the processing of the application by the GST authorities. This can lead to a prolonged period of uncertainty and prevent businesses from winding up their operations.

2.     Non-Receipt of Acknowledgment: Sometimes, businesses may not receive the acknowledgment of their GST registration surrender application. This can lead to a delay in the surrender process and create confusion about the status of their GST registration.

3.     Complicated Process: The process of surrendering GST registration can be complicated and confusing for businesses. This is especially true for small and medium-sized enterprises that may not have the resources to navigate the legal and procedural complexities of the GST system.

4.     Recovery of GST: In some cases, businesses may be required to pay back the GST input tax credit claimed earlier in the financial year when they surrender their GST registration. This can create a financial burden on businesses and impact their cash flow.

5.     Liability for Tax Payment: Even after the cancellation of GST registration, businesses may be liable to pay any outstanding tax liability or penalties that were incurred before the cancellation. This can create a significant financial burden for businesses that are already struggling to wind up their operations.

Conclusion

Surrendering GST registration can be a complex and challenging process for businesses, and they may face several problems while doing so. Delay in processing, non-receipt of acknowledgment, complicated process, recovery of GST, and liability for tax payment are some of the common issues that businesses may encounter while surrendering their GST registration. It is crucial for businesses to understand the legal and procedural requirements of the GST system and seek professional help to ensure a smooth and hassle-free surrender of their GST registration.

 

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