GST Registration Cancellation: Procedure, Final Return and What Happens to Stock and Credit

A GST registration can end in two ways: the business applies to cancel it, or the tax officer cancels it. Either way, cancellation does not wipe out what is owed for the period before it, and a few final steps are often missed, leading to notices long after the business has closed.

This article explains when GST registration can or must be cancelled, the procedure for each route, the final return, and what to do with stock and credit on hand. If your registration has already been cancelled by the officer and you want it back, see how to reactivate a cancelled GST registration.

Cancellation by the taxpayer

A registered person can apply for cancellation in common situations such as:

• The business has been closed or discontinued
• The business has been transferred, merged or amalgamated with another entity
• There is a change in the constitution of the business that results in a change of PAN, such as a proprietorship becoming a company
• The person is no longer required to be registered, for example because turnover is below the threshold and registration was not compulsory for any other reason
• The proprietor has died, in which case the legal heir applies

Procedure

1. File Form GST REG-16 on the GST portal, with the reason, the date from which cancellation is sought, and details of stock, semi-finished and finished goods and capital goods held on that date
2. Ensure returns up to the date of application are filed; pending returns usually hold up the application
3. The officer may ask for clarification; if satisfied, the cancellation order is issued in Form GST REG-19
4. Where a business is transferred or merged, the details of the transferee’s registration are given, so that credit can be moved where permitted

Cancellation by the officer

The proper officer can cancel registration, after notice, in cases such as:

• Returns not filed for a continuous period, as prescribed (for regular taxpayers, commonly six months; for composition taxpayers, the annual return beyond the prescribed time)
• Business not conducted from the declared place of business
• Registration obtained by fraud, wilful misstatement or suppression of facts
• Issue of invoices without supply of goods or services, or availing credit in violation of the law
• Voluntary registration where business did not commence within six months

Procedure

1. The officer issues a show cause notice in Form GST REG-17, and the registration may be suspended meanwhile
2. Reply in Form GST REG-18 within seven working days, with the reasons and supporting documents; where the default is non-filing, file the pending returns before replying
3. If the reply is accepted, proceedings are dropped in Form GST REG-20; otherwise, the cancellation order is issued in Form GST REG-19

Replying to REG-17 in time, with the pending returns filed, is far easier than seeking revocation after the cancellation order.

Stock and credit on the date of cancellation

On cancellation, the registered person must pay an amount equal to the input tax credit on inputs held in stock, inputs in semi-finished or finished goods, and capital goods (reduced as prescribed), or the output tax on such goods, whichever is higher. This is paid through the electronic ledger or in cash, and shown in the final return.

Final return: GSTR-10

• Every person whose registration is cancelled must file the final return in Form GSTR-10 within three months of the date of cancellation or the date of the cancellation order, whichever is later
• It is different from the regular returns, and is often missed after a business closes
• Failure leads to a notice, and the officer can assess the liability on best judgment, with late fees

Liability continues after cancellation

• Cancellation does not affect the liability to pay tax and other dues for any period before cancellation, whether determined before or after it
• Notices, audits and recovery for the earlier period can continue
• Keep the records, invoices and returns for the period required under GST law, even after closing the business

Practical points

• Before applying, file all pending returns and reconcile the electronic ledgers
• Decide the effective date carefully; it decides the period for which returns are needed
• Close or transfer stock before the cancellation date where possible, to reduce the reversal
• If the business is being transferred to a company or LLP, apply for the new registration before cancelling the old one, so that credit can be moved. See converting a proprietorship or firm into a company
• After cancellation, file GSTR-10 promptly

Frequently asked questions

Can I cancel GST registration if my turnover is below the limit?

Yes, if registration is not compulsory for any other reason, such as inter-State supply of goods or selling through an e-commerce operator. Check this before applying.

My registration was cancelled for not filing returns. What now?

File the pending returns with late fees and interest, and apply for revocation within the time allowed. See how to reactivate a cancelled GST registration.

Is GSTR-10 required if I had no stock?

Yes. The final return is required for every cancellation, even if the stock and credit figures are nil.

Can I get a new GST registration after cancellation?

Yes, but where the earlier registration was cancelled by the officer for defaults, a fresh application may be scrutinised closely; revocation is usually the better route if available.

ചുരുക്കം (Summary in Malayalam)

ബിസിനസ് അവസാനിപ്പിക്കുമ്പോഴോ മറ്റൊരു സ്ഥാപനത്തിലേക്ക് മാറ്റുമ്പോഴോ PAN മാറുമ്പോഴോ REG-16 വഴി GST രജിസ്ട്രേഷൻ റദ്ദാക്കാം. Returns ഫയൽ ചെയ്യാതിരിക്കൽ, പ്രഖ്യാപിച്ച സ്ഥലത്ത് ബിസിനസ് ഇല്ലാതിരിക്കൽ തുടങ്ങിയ കാരണങ്ങളാൽ ഉദ്യോഗസ്ഥൻ REG-17 notice നൽകും; 7 പ്രവൃത്തി ദിവസത്തിനകം REG-18 വഴി മറുപടി നൽകുക. റദ്ദാക്കുമ്പോൾ stock-ലും capital goods-ലുമുള്ള ITC തിരിച്ചടയ്ക്കണം. റദ്ദാക്കിയ ശേഷം 3 മാസത്തിനകം GSTR-10 (final return) ഫയൽ ചെയ്യണം. റദ്ദാക്കലിന് മുമ്പുള്ള കാലത്തെ നികുതി ബാധ്യത തുടരും.

This article gives a general overview of cancellation of registration under the CGST Act, 2017 and the rules. Forms, time limits and procedures are revised from time to time; for accurate and current requirements, refer to the Act, the rules and notifications as amended and the GST portal. The article is not advice on any particular case.