Cancellation of registration is often treated as an administrative event. It is not. A cancelled registration prevents the issue of tax invoices, blocks the passing of credit to customers, and where the cancellation is retrospective, unsettles transactions that were completed months earlier.

How cancellation arises

Registration can be cancelled on the application of the registered person, or by the proper officer on his own motion.

On application

  • The business has been discontinued, transferred, amalgamated, demerged or otherwise disposed of

  • There is a change in the constitution of the business

  • The person is no longer liable to be registered

By the proper officer

  • The registered person has not conducted business from the declared place of business

  • Invoices have been issued without an actual supply of goods or services

  • Returns have not been furnished for a continuous period as prescribed

  • Registration was obtained by fraud, wilful misstatement or suppression of facts

  • The provisions of the Act or the rules have been contravened in a manner prescribed under rule 21

The procedure

Sequence of events in a departmental cancellation

  1. Step one

    Notice in REG-17

    The proper officer issues a show cause notice setting out the ground and giving an opportunity to reply, ordinarily within seven working days.

  2. Step two

    Reply in REG-18

    The registered person replies, addressing the ground and enclosing supporting records. A request for personal hearing should be made here.

  3. Step three

    Order

    If the reply is satisfactory the proceedings are dropped in REG-20. If not, cancellation follows in REG-19, stating the effective date.

  4. Step four

    Final return

    A final return in GSTR-10 has to be furnished within three months of the date of cancellation or the date of the order, whichever is later.

Revocation of cancellation

Where registration has been cancelled by the officer on his own motion, an application for revocation can be made in REG-21. The application has to be filed within thirty days from the date of service of the cancellation order, and this period is extendable by the prescribed authorities on sufficient cause being shown.

Where cancellation was for non filing of returns, the returns for the relevant periods have to be furnished, with tax, interest and late fee paid, before the revocation application is filed. Filing the application without clearing the underlying default achieves nothing.

Effect on customers

Customers who claimed credit on invoices issued during a period covered by a retrospective cancellation are exposed to enquiry. It is prudent to inform affected customers, and to keep the correspondence on record, because the question will be asked later.

Registration questions

Does liability end when registration is cancelled?
No. Cancellation does not affect the liability to pay tax and other dues for any period before the date of cancellation, whether those dues were determined before or after that date.
Can a fresh registration be taken instead of seeking revocation?
A fresh registration does not cure the earlier default and the officer may take the earlier cancellation into account. Where the earlier registration is cancelled and revocation is available, revocation is ordinarily the correct route.
What if the thirty day period for revocation has passed?
Extension is available from the prescribed authorities on sufficient cause. The application should explain the delay honestly and with supporting material.