GST has been a great change in the tax system of India. It has made indirect tax easy and equal to all states of India. In the olden days, different indirect taxes for different states were there, but now, a single GST has been followed in all the states of India. GST has unified the tax system in India. GST registration is compulsory for all businesses having turnover of up to or more than 20 lakhs. It gives various benefits to the taxpayer. Hence, one must take GST registration if it falls under the category of same. GST registration is not a one-time thing. If anything against the goods and services law happens, then GST cancellation will be an option that is in the hands of the GST department. GST cancellation can be done by the department, or it can be done voluntarily. The current blog will help you to know about all this in detail.
What is GST Cancellation?
Under the Goods and Services Tax Act of 2017, it is compulsory for all business owners to take GST registration who fall under the eligibility criteria to take GST. Businesses whose turnover is up to 20 lakh or more than 20 lakhs, businesses that are involved in interstate transactions, or the business owner doing business through an e-commerce platform are mandatorily taking GST registration. They cannot work without GST registration and have to pay GST in every scenario. Through this registration, a taxpayer will be added to the GST tax system, and the removal of the taxpayer from the GST tax system is known as cancellation of GST.
Grounds for Cancellation of GST
Under section 29 of the GST law, certain grounds have been given on the basis of those grounds, goods and services registration cancellation can be done. The list of those grounds is given below:
- If a person who voluntarily registered under Section 25(3) of GST legislation doesn’t start their business within six months of registration, their registration can be cancelled.
- Any registered person, except those exempted by section 10 of the GST legislation, may have their registration revoked if they don’t submit returns for a sustained length of time as specified by the rules.
- Registration obtained through fraud or false information can also be cancelled
- If any rule, regulation or law regarding the goods and services gets violated by the taxpayer, there are chances of cancellation of its business.
- The individual’s registration under a simplified tax scheme may be revoked unless they file their tax return for more than three months after the due date has passed.
Why is the Cancellation of GST Important in 2023?
From the perspective of both the Department of GST and the taxpayer, sometimes GST cancellation becomes important. GST can be cancelled on the basis of various grounds given under section 29 of the Goods and Services Tax of 2017. Under the same section, provision related to cancellation or suspension of GST registration has been given in detail. The most important thing regarding GST cancellation is that it will remove those taxpayers from the tax system who are non-compliant taxpayers. Some of the important points regarding Cancellation of GST are Given below:
- With respect to taxpayers’ cancellation of GST becomes important if the business of the taxpayer has been discontinued or it came out of the eligibility criteria of the GST.
- Pursuant to the GST department’s vantage point of view, unnecessary non-compliant GST taxpayers are going to be thrown out of the system.
- Saves the taxpayers from penalties which can be levied if a taxpayer does not pay the tax if its business got discontinued or came out of the scope of the GST
- Helps the department to make sure that taxpayers will comply with the GST laws
- Since the GST was eliminated, there is no longer a requirement to pay the goods and services tax.
Important Changes Regarding GST Cancellation in 2023
In the 49th Goods and Services Council meeting that was held on 18th of February 2023, it was suggested by the council to have an amnesty scheme that will be valid till 30th June 2023. The motive behind the scheme is to help the taxpayers whose goods and services tax registration has been cancelled because of the non-filing of goods and services tax returns. Through this scheme, called an amnesty scheme goods and services tax department will allow the taxpayers to file for the revocation application of registration of goods and services tax. This is an extra efford made by the council for the taxpayers.
Consequences of Cancellation of GST
There are various negative impacts of GST cancellation on a business. Some of the serious consequences of cancellation of goods and services tax registration are given below:
- The business will lose credibility in the market
- Loss of reliability and trustworthiness in the market between the consumers
- Sometimes, after the cancellation of GST, legal action might be taken against the taxpayer in case he or she is not abiding by the GST laws or rules.
- Business owners cannot claim the input tax credit
- One cannot collect the GST from the consumer of its goods or services
- It becomes very difficult to get re-registration once the GST cancellation is done
How to Avoid Cancellation of GST?
It is not the intention of the department to do GST Cancellation unnecessarily. If the taxpayer does not fall under the grounds of cancellation, the department will never cancel the registration. Some of the best practices to avoid cancellation of GST are given below:
- Timely return filing by the taxpayer
- Timely filing of the tax by the taxpayer
- Provide accurate and right information to the GST department
- Compliance with all the rules or regulations and various laws under the Goods and Services Act of 2017
- Respond to the notices of the department if you get any such notice
- Regularly check the compliance of the goods and services
Impact of GST Cancellation on a Business
GST cancellation can affect any kind of business very significantly. As a result of the cancellation of GST, a business can face many difficulties. It can lose credibility, reliability and customer trust among the consumers in the market. Sometimes businesses have to face legal trouble, which will take the time and money of the business owner. Goods and services registration cancellation has a serious impact on the business. One cannot take or collect the GST from the consumers who are taking its goods and services if its GST gets cancelled.
Once a GST gets cancelled, it will become very difficult to re-register your business under the Goods and Services Tax Act. GST registration helps the business while taking various benefits from the government. But if it got cancelled, the image of the business got seriously hampered in the market between the consumers as well as competitors. Hence, it is always suggested to take care of the rules and regulations of the GST so that the business will not face cancellation and can run smoothly between the competitors in the market.
Conclusion
GST cancellation, or the removal of a taxpayer from the Goods and Services Tax system in India, is a critical process that can have significant consequences for both businesses and the GST department. This cancellation can occur for various reasons, including non-compliance with GST laws, fraud, or failure to meet eligibility criteria. For businesses, Goods and services registration cancellation can lead to a loss of credibility, trustworthiness, and customer trust in the market. Overall, maintaining GST registration is not just a legal requirement; it is essential for a business’s reputation and smooth operation in the competitive market. Therefore, staying compliant with GST laws should be a top priority for all eligible businesses in India.
