GST CANCELLATION AND SURRENDER
GST Cancellation or Surrender refers to the process of legally deactivating a taxpayer’s GST registration when the business ceases operations, turnover falls below the threshold, or other valid reasons arise. Once the GST registration is cancelled, the taxpayer is no longer required to collect or pay GST or file returns under the Goods and Services Tax regime.
Our team of experts assists businesses with the entire GST cancellation process from eligibility verification and application filing to post-cancellation compliance ensuring a smooth and legally compliant closure of your GST registration.
WHAT IS GST CANCELLATION?
GST cancellation means the termination of a taxpayer’s GST registration by the taxpayer voluntarily or by the GST Department for non-compliance or other reasons. Once the registration is cancelled, the taxpayer cannot collect GST, issue tax invoices, or claim input tax credits (ITC).
Cancellation can be:
- Voluntary – when the taxpayer applies for cancellation.
- Suo Motu (by GST Officer) – when the department cancels the registration for valid reasons.
- By Legal Order – such as closure, merger, or change in business constitution.
WHO CAN APPLY FOR GST CANCELLATION?
GST registration can be cancelled in the following cases:
- Business Discontinuance: The taxpayer has closed down or ceased operations.
- Turnover Below Threshold: The taxpayer’s turnover falls below the prescribed limit for mandatory registration (₹40 lakhs/₹20 lakhs/₹10 lakhs depending on state and nature of supply).
- Change in Constitution: Business converted from proprietorship to company/LLP or merged/amalgamated.
- Transfer of Business: Ownership transferred to another person (in such case, the new entity must register).
- Voluntary Registration Withdrawn: When a person registered voluntarily wishes to opt-out.
- Non-compliance: If the taxpayer has not filed returns for an extended period (departmental cancellation).
DEPARTMENTAL (SUO MOTU) CANCELLATION
A GST Officer may cancel a registration in the following cases:
- The taxpayer fails to file returns for six consecutive months (regular) or three quarters (composition).
- The taxpayer obtained registration through fraud, willful misstatement, or suppression of facts.
- Business discontinued or transferred without informing the department.
- The taxpayer issues invoices without supply of goods/services.
- Non-payment of tax or violation of GST provisions.
Process:
- Officer issues Show Cause Notice (Form GST REG-17).
- Taxpayer must respond in Form GST REG-18 within 7 working days.
- If the reply is satisfactory, cancellation proceedings are dropped (Form GST REG-20).
- If unsatisfactory or no reply, registration is cancelled via Form GST REG-19.
REVOCATION OF GST CANCELLATION
If registration is cancelled by the officer (not voluntarily), the taxpayer can apply for revocation within 30 days from the cancellation order.
Form Used: GST REG-21
Condition: All pending returns and tax dues must be cleared before filing the revocation.
If the officer is satisfied, an order for revocation is issued in Form GST REG-22.
CONSEQUENCES OF GST CANCELLATION
- The taxpayer cannot collect GST on sales.
- No Input Tax Credit (ITC) can be availed or passed on.
- Pending liabilities must be settled before cancellation.
- All pending returns (GSTR-1, GSTR-3B, GSTR-9) must be filed.
- The taxpayer must reverse ITC on closing stock and capital goods.
- E-way bills cannot be generated once registration is cancelled.
PENALTIES FOR NON-COMPLIANCE
- Non-filing of cancellation application may attract penalties under Section 125 of the GST Act (up to ₹25,000).
- Continued business operations after cancellation is a punishable offence.
- Liability to pay tax, interest, and penalty remains even after cancellation.
BENEFITS OF GST SURRENDER / CANCELLATION
- Reduces unnecessary compliance burden and filing obligations.
- Helps avoid penalties for non-filing of nil returns.
- Streamlines closure of inactive or merged entities.
- Prevents future GST liability accruals.
- Allows businesses to restart afresh when needed.
