When and why is GST Cancellation necessary?
There can be many valid reasons for cancelling GST registration. These can be divided into two main categories:
1. Voluntary Cancellation (at your will):
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Business Closure: When a business or proprietorship is closed.
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Less than Turnover Threshold: If your turnover is now less than the prescribed limit for GST registration (such as ₹40 lakh or ₹20 lakh, for services) and you registered voluntarily.
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Change in Constitution: When there is a change in the constitution of the business (such as changing from proprietorship to partnership or company) due to which the PAN number is changed.
2. Suo-Moto Cancellation (By GST Officer):
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Continuous Non-Filing of Returns: If you are a regular taxpayer and you have not filed returns for 6 months. For Composition dealer this limit is 3 quarters.
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Not Commencing Business: If you have taken voluntary registration, but have not started business within 6 months.
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Fraudulent Registration: If registration has been taken with wrong information or fraudulently.
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Violation of Rules: Violating any important rule of GST Act.
GST Cancellation Process: What are the Steps?
The GST cancellation process is completely online and involves some important steps:
1. Filing pending returns: First of all, you have to file all pending returns (GSTR-1, GSTR-3B) before filing your GST cancellation application. If you have any tax due, it is also important to pay it.
2. Filing application: You have to login to the GST portal and file Form GST REG-16. In this form, you have to provide the reason for cancellation, effective date of cancellation, and closing stock details.
3. Input Tax Credit (ITC) Reversal: At the time of cancellation, you need to reverse ITC on all inputs, semi-finished goods, finished goods, or capital goods in your stock. ITC reversal means that you need to pay the tax that you had earlier claimed as ITC on those items.
4. Final Return (GSTR-10): After receiving the cancellation order, you need to file Form GSTR-10, also known as Final Return. This return is mandatory to be filed within 3 months of the cancellation order. In this, you need to provide all the financial details till the effective date of cancellation.
5. Officer's Approval: After submitting the application, the GST officer examines it. If everything is correct, the officer issues an order to cancel your registration.
The process of GST cancellation is not just an administrative procedure. It directly impacts a person and his business. When a business closes, it means that someone has closed a dream. At such a time, a smooth and transparent process becomes very important. Not imposing any direct cancellation fees by the government is a positive step, which relieves businessmen from financial burden. But, the complexity of pending liabilities and compliances can create challenges for small businesses. Hence, it is very important to have the right information and correct guidance so that people can avoid unnecessary losses during this period.
Conclusion
Cancelling GST registration is a straightforward process, in which no fees are charged by the government. But, it is necessary to follow some important steps and compliances for this. You have to clear all your pending dues (taxes, interest, penalties) and file GSTR-10 (Final Return). If you find this process complex, then taking help from a professional can be a sensible step, for which you will have to pay their professional fees. With the right information, you can easily complete this process.
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Frequently Asked Questions (FAQs)
Q1: Do I have to pay any fees to the GST department for cancelling GST registration?
A1: No, there are no official fees or charges levied by the GST department or the government for cancelling GST registration. This process is absolutely free on the GST portal.
Q2: If I took GST registration by mistake and now my turnover is less than the threshold, can I cancel it without any penalty?
A2: Yes, if your turnover is less than the GST threshold and you want to cancel the registration, you can file an application without any penalty, provided you have filed all pending returns and there is no tax due.
Q3: Is it mandatory to pay the fees of a professional (CA) during GST cancellation?
A3: No, it is not mandatory to pay the fees of a professional. You can complete the GST cancellation process online yourself. But, if you find the process complex, or you want to avoid mistakes, then taking help from a professional can be a better option.
Q4: What loss can I incur if I do not cancel my GST registration?
A4: If you do not cancel your GST registration, it will be mandatory for you to file returns every month or quarter, even if your business is closed or there are no transactions. You may be charged late fees, interest, and penalties for not filing returns.
Q5: How important is it to file Final Return (GSTR-10) after GST cancellation?
A5: It is very important to file Form GSTR-10 (Final Return) after GST cancellation and it is mandatory. This return cancellation has to be filed within 3 months of receiving the order. If you do not do this, you may be penalized.