In India, the Goods and Services Tax is an indirect tax imposed on the supply of goods and services. Businesses exceeding specified turnover thresholds are obligated to undergo GST registration. But there are instances where GST registration may face cancellation for various reasons. It is essential for businesses to grasp the rules for undoing terminated GSTR or GST registration. In this blog, we shall understand the specific rules for undoing terminated GSTR in Indian context.
Common Reasons for Enrolment Neutralisation by Tax Officers
Before going into the rules for undoing terminated GSTR, let us understand the major reasons for enrolment neutralisation. Enrolment neutralisation by tax officers can occur for various reasons, and some of the common factors leading to this action include:
1. Inactive Business Operations:
The taxpayer individual is not actively conducting any business from the registered business place.
2. Inappropriate Billing Practices:
Providing bills or invoices without an actual supply of services or goods, constituting a violation of expenditure norms.
3. Non-Compliance with Anti-Profiteering Requirements:
Failure to adherence to anti-profiteering requirements, such as not passing on the benefits of Input Tax Credit to clients.
4. Changes Effective from January 2021:
Utilisation of ITC from the credit of the electronic ledger to offset over 99% of tax liability for restricted taxpayers exceeding a monthly taxable supply amount of Rs. 50 lakhs, with certain exceptions.
Acceptance Criteria for Retraction of Goods and Services Tax Enrolment
The retraction of Goods and Services Tax enrolment is permissible under specific conditions outlined by the relevant authorities. This process can be initiated only when the concerned GST official or officer has taken action to nullify someone’s enrolment.
Individuals seeking to retract their Goods and Services Tax enrolment must fulfil the following criteria. The application must be submitted within 30 days from the date they receive the notice of enrolment nullification.
It’s important to note that individuals who have voluntarily nullified their GST enrolment are not eligible to apply for retraction. The acceptance of retraction is limited to cases where the enrolment nullification has been initiated by the GST official or officer.
Procedure for Goods and Services Tax Registration Cancellation by Officer
Let us now see the procedure for GST cancellation before understanding the rules for undoing terminated GSTR. The cancellation of Goods and Services Tax registration by a tax officer involves a systematic process, outlined as follows:
1. Issuance of Show Cause Notice:
The concerned tax officer, upon identifying sufficient grounds for cancelling an individual’s GST enrolment, initiates the process by issuing a show cause notice. This notice is generated in Form GST REG-17.
2. Response to Show Cause Notice:
The recipient of the show cause notice is required to provide a response using Form Goods and Services Tax REG-18. This response must be submitted within seven working days of receiving the notice and should include reasons addressing why the enrolment is being considered for cancellation.
3. Examination of Response:
If the tax officer finds the response provided by the individual to be satisfactory, the proceedings will be halted. Subsequently, the officer issues an order in Form Goods and Services Tax REG-20.
4. Proceedings for Cancellation:
In cases where the enrolment is deemed liable for cancellation, the tax officer proceeds with an order issued in Form Goods and Services Tax REG-19. This order is dispatched along with a show cause notice within 30 days from the date of receiving the response.
What are the Rules for Undoing Terminated GSTR?
The retraction of Goods and Services Tax enrolment that has been nullified by tax officials is subject to specific rules for undoing terminated GSTR, as outlined below:
1. Submission of Retraction Application:
An enrolled individual, whose enrolment has been discontinued by tax officials, can submit a retraction application for neutralising Goods and Services Tax enrolment. This application is to be made using Form GST REG-21 within 30 days of receiving the notice about enrolment nullification. Alternatively, it should be done within a duration specified by the Additional Commissioner, Joint Commissioner, or Commissioner, as per the powers granted by sub-section (1) of section 30, either directly or through designated facilitation centres.
2. Restrictions on Retraction:
One of the important rules for undoing terminated GSTR is that no retraction application can be filed if the enrolment nullification resulted from the failure to provide returns on time. However, if the returns are subsequently provided, including payment of any associated penalties, interest, and late fees, a retraction application becomes admissible.
3. Submission of Returns:
The subject person must furnish all returns for the period from the enrolment nullification date to the retraction of the nullified enrolment order date within 30 days from the date of retraction.
4. Retrospective Enrolment Cancellation:
In cases where the enrolment nullification is retrospective, the rules for undoing terminated GSTR state that the enrolled person is required to submit all returns for the period from the date of enrolment nullification to the date of the retraction order of Goods and Services Tax nullified enrolment within 30 days from the date of the retraction order.
5. Officer’s Evaluation and Order:
If the tax officer is satisfied with the reasons provided in the application, an order in favour of retraction is issued in Form GST REG-22 within 30 days from receiving the application. The applicant is promptly notified of the decision.
6. Rejection of Application:
If the officer is not convinced by the reasons or finds them insufficient, the application can be rejected, and the rejection is communicated to the applicant in Form Goods and Services Tax REG-05.
7. Notice for Clarification:
Before confirming the order mentioned in clause (B) of Sub-rule 2, the concerned tax officer issues a notice in Form Goods and Services Tax REG-23, requiring the applicant to justify why the application for retraction of nullified enrolment should not be rejected.
8. Applicant’s Response:
The applicant must respond within seven working days from the date of receiving the notice in Form GST REG-24, providing clarification or information.
9. Final Decision and Order:
Upon receiving the applicant’s clarification or information, the officer issues a final order in favour or against the applicant as per Sub-rule 2 within 30 working days from the date of receiving the reply or information.
Final Thoughts
The rules for undoing terminated GSTR involve a systematic process governed by specific timelines and conditions. Individuals whose enrolment has been nullified must adhere to the prescribed procedures outlined in forms such as GST REG-21. Compliance with return submissions, both in regular and retrospective nullification scenarios, is crucial. The evaluating tax officer plays a vital role, issuing orders based on the satisfaction of provided reasons. Timely responses to notices and clear justifications are essential for a successful retraction. These rules for undoing terminated GSTR ensure a structured approach to address enrolment terminations, maintaining transparency and procedural fairness in the retraction process.
