The GST laws brought transparency and integrity to the indirect tax system in India. The government has passed various amendments and notifications from time to time to make compliance easier for taxpayers. Simultaneously, the laws have been made more stringent to eliminate tax evasion. Failure to comply with GST rules can lead to the cancellation or suspension of a GST number. Businesses cannot make any taxable supplies after the suspension of their registration. Here we discuss the reasons for the suspension of registration and the measures to revoke the suspension.
Reasons for Suspension/Cancellation of GST Registration
Section 29 of the CGST Act, 2017 covers the suspension of registration under GST, and the procedure for this has been stated in Rule 21 of the CGST Rules, 2017. As per Section 29(2) of the CGST Act, the concerned GST officer can cancel the registration of a person from such a date, including the retrospective date, that is, the previous date, as he may deem fit, if the taxpayer has not filed his tax returns for a continuous period of six months. The other reasons for the cancellation of registration are as follows:
- When there is a change in the constitution of the business.
- When the business is transferred, discontinued, or closed.
- When the taxpayer fails to follow the provisions of the GST Act.
- When the taxpayer voluntarily applies for cancellation, the GST officer suspends the taxpayer’s GST number.
- In situations where the GST number has been obtained using fraudulent methods, the officer has the right to suspend the GST registration of the taxpayer.
- If it has come to the attention of the tax authorities that the business is operated from a place other than the one mentioned while registering on the portal,
- A failure to start the business within six months of the GST registration may lead to cancellation or suspension of the GST number.
- If it has come to the attention of the authorities that the taxpayer has issued invoices without supplying goods or services, the GST registration can be cancelled or suspended.
- When the taxpayer fails to furnish his bank account details, the registration can be cancelled after a warning.
- When a taxpayer is registered under the composition scheme and has not furnished the returns for three consecutive tax periods,
- Taxpayers other than those registered under the composition scheme have not furnished the returns for six months.
The GST registration will not be cancelled or suspended without giving due notice to the taxpayer. The officer first issues a warning or a chance to rectify the mistake before deciding to suspend.
Consequences of GST Number Suspension
If the GST of the supplier is suspended:
- The supplier will not be able to make taxable supplies of goods and services, issue invoices, or charge and collect taxes.
- The taxpayer will not be able to pay taxes or file returns on the GST portal.
- The supplier will not be able to claim input tax credit.
Soon after the taxpayer gets notice from the authorities that his GST number is suspended, he has to immediately contact the assessing officer and, after rectification of the issues, get the registration activated. Failure to do so can result in the cancellation of the taxpayer’s registration and penalties due to non-compliance with GST regulations.
Receipt of Notice of Suspension
When the taxpayer has not voluntarily applied for cancellation of registration but still has received a notice of suspension or cancellation, he has to do the following:
Notice of Discrepancies
On receiving a notice of discrepancies, the taxpayer has to reply to the authorities within one month of receiving the notice. The reply must contain the details of the corrective measures and actions taken to comply and rectify the issues causing non-compliance and the reasons for non-cancellation of the registration.
Notice of Cancellation
On receiving the notice of cancellation of the GST registration, the taxpayer has to reply to the tax officer in form GST REG 18 online through the GST portal within one month of receiving the notice.
Notice Due to Non-Filing of Returns
Non-filing of returns is the most common case of suspension of GST registration for taxpayers. When the taxpayer receives such a notice, he can immediately file all the returns, submit the reply, and take steps to get the suspension revoked.
How to Activate a Suspended GST Number?
Registered taxpayers can apply for reactivation of GST Registration within 30 days by complying with the earlier defaults. Then the suspended or cancelled GST number will automatically get restored. The taxpayer can opt for automated drop proceedings after filing the pending GST returns. This can be done only when the authorized GST official has suspended the GST of the taxpayer. The voluntarily suspended GST by the taxpayer himself cannot be revoked under any circumstances.
Automated Drop Proceedings to Activate GSTIN
The Goods and Services Network issued an advisory in December 2022 about the facility to ‘initiate drop proceedings ‘of suspended GSTINs due to non-filing of returns. This feature has been enabled in the GST portal. It allows the taxpayer to revoke the suspension due to non-filing of GST returns. The introduction of this facility has been a great relief to the taxpayers who were not able to file returns in time due to different circumstances. The steps to activate the suspended GSTIN in the portal are as follows:
Step 1: The taxpayer has to log in to the GST portal, go to ‘Services’, and select the ‘User Services’ tab.
Step 2: Then they have to click on the ‘View Notices and Orders’ option from the drop-down list.
Step 3: The taxpayer then has to click on the ‘Initiate Drop Proceedings’ option.
Step 4: The system then displays a message for successfully initiating drop proceedings, and the suspension gets automatically dropped and the GST number is activated.
This facility is available for taxpayers whose registrations have been suspended after 1st December, 2022. Taxpayers whose GSTINs have been suspended before 1st December 2022, have to approach their jurisdictional tax officers to get the suspension revoked and the GSTIN activated. The same applies to taxpayers who have filed all the pending returns, but the time limit to reply to the show cause notice has lapsed. They are required to contact their jurisdictional officers for activation of their GSTIN.
New Rule on Revocation of Cancellation of GST Registration
According to the new notification, Notification No. 38/2023, Central Tax dtd 4th August 2023, the time limit for applying for revocation or cancellation of GST registration has been increased from 30 days to 90 days. This time limit can be extended for a further period not exceeding 180 days by the GST commissioner or officer.
Frequently Asked Questions
- What is the time limit for the revocation of a voluntary cancellation of GSTIN by the taxpayer?
Answer: If the taxpayer has requested a cancellation of registration and then wishes to revoke the cancellation, he has to file for revocation within 30 days of requesting the cancellation.
- Where can the taxpayer view the notice of suspension of GSTIN sent by the jurisdictional officer?
Answer: The system-generated intimation of suspension and notice for cancellation of registration in the form GST REG-31 is available on the portal. The form is also emailed to the registered email address of the taxpayer.
Complying with GST rules like payment of taxes and filing of returns on time is important to avoid cancellation of the GST number. When a suspension notice is received from the tax authorities, the taxpayer has to take steps to rectify the causes of non-compliance. The taxpayer can utilize the automated drop proceedings to revoke the suspension or cancellation in the GST portal. This is possible only when the suspension was due to non-filing of returns and the taxpayer subsequently filed the returns. For any other reason, the taxpayer must immediately contact the jurisdictional officer to revoke the cancellation and activate his GSTIN so that his business is not affected by it.