The CBIC has clarified the key procedural aspects of cancellation of GST Registration by notifying GST Circular 69/43/2018 on October 26, 2018. The circular, predetermined to facilitate uniform interpretation of the law across divergent field formations, delineates in detail the considerations surrounding the cancellation requests filed using FORM GST REG-16. This article aims to provide a comprehensive analysis of the salient points emanating from this vital policy guidelines referred to in the said circular.
1. CBIC Requested for Clarifications
CBIC had been inundated with numerous requests seeking precise explanation on a spectrum of issues associated with the processing stage of GST registration cancellation applications in FORM GST REG-16. In response to these requests and to ensure consistent and uniform adherence to legal provisions across various domains, CBIC exercised its authoritative power under Section 168(1) of the CGST Act to provide detailed clarifications.
2. Reasons for Cancellation
Section 29 of the CGST Act, inseparably interpreted with Rule 20 of the CGST Rules, encapsulates the scenarios under which taxpayers can legitimately initiate a request for the cancellation of their GST registration. The list of provisions include circumstances such as business discontinuation, enterprise amalgamation or sale resulting in business transfer, alteration in business’s PAN, among other specified conditions.
3. Liberal Interpretation of Application Timeline
While Rule 20 of the CGST Rules mandates that requests for cancellation are filed through FORM GST REG-16 on the GST portal within a 30-day window from the event triggering submission of the cancellation application, there may be instances where determining the exact date of occurrence becomes problematic, such as slow-paced business transfers. In such instances, a more relaxed, understanding approach towards the 30-day submission window is recommended to avert unwarranted rejections rooted in technicalities.
4. Details Submission with FORM GST REG-16
The submission of cancellation application via FORM GST REG-16 necessitates the capture of several crucial data points. These include the applicant’s contact information for future communication, grounds for termination, proposed cancellation date, input tax details and taxes payable on stocks, specifics of business amalgamation or transfer, and the most recently filed return along with its Application Reference Number (ARN). Upon successful submission, the jurisdictional officer can access the application particulars for further action.
5. Efficient Application Processing
The CBIC mandate highlights that barring particular eventualities, requests for cancellation should be acknowledged within 30 days of submission. Denials should only occur under situations where the application is found to be incomplete or where the ensuing merged entity has not procured registration prior to the cancellation application filing.
6. Application Discrepancy Resolution
If anomalies are detected in relation to the above-mentioned scenarios, the relevant officer must issue a written notice to the applicant, granting a seven-working-day timeframe for response. In cases where either no response is received or an inadequate reply is submitted, the officer has the authority to reject the request. The complete proceedings, inclusive of the factors resulting in the denial, is meticulously recorded in the system.
7. Mandatory Final Return (GSTR-10)
After cancellation, except for specific categorizations, there is an obligation on applicants to submit a final return using FORM GSTR-10 within three months from either the effective cancellation date or the cancellation order issuance date, whichever is later. Impressively, an extension provision was offered for those who underwent cancellation on or before September 30, 2018, according to a Central Tax notification issued on October 26, 2018.
8. Mandatory Debiting of Input Tax
Sub-section (5) of Section 29 dictates that taxpayers are required to debit the input tax contained in stocks from electronic credit or cash ledger prior to the effective cancellation date. This process of debit can also be executed during the final return submission using FORM GSTR-10. It is imperative to remember that the obligation to reconcile the balance in the electronic credit ledger is fulfilled automatically. If the taxpayer’s output tax liability exceeds the available input tax credit, the difference must be compensated in cash.
9. Ramifications of Non-Submission (GSTR-10)
If the final return via FORM GSTR-10 is not submitted within the stipulated period, a notice in FORM GSTR-3A is issued. Continued non-compliance for 15 days results in the issuance of an assessment order in FORM GST ASMT-13 under Section 62 of the CGST Act. While the order might be rescinded if the return is filed within 30 days of the ASMT-13 order, penalties in the form of interest and late fees remain applicable.
10. Mandate to Issue Notice and Suspension of Registration
Rule 68 of the CGST Rules requires that notices be issued to registered persons who fail to submit various categories of returns. However, for taxpayers who have not made taxable supplies during the interval between registration and cancellation application, and have verified this with an attested declaration, there isn’t a compulsion to issue a notice. The circular acknowledges the advent of registration suspension through the CGST (Amendment) Act, 2018 while insisting on the importance of final return submission under Section 45.
11. Sourcing Information for FORM GST REG-19
The circular further elaborates that the data incorporated in the table of FORM GST REG-19 is derived from the liability ledger and the differential values between Table 10 and Table 11 of FORM GST REG-16.
CBIC GST Circular 69/43/2018 profoundly addresses the prominent issues regarding the cancellation of GST registration, substantiating uniformity and transparency. This insightful guideline candidly elaborates each step of the application and adjudication process, ensuring clear communication pathways and outlining the importance of final return filing and debiting of input tax. This extensive guide not only benefits the taxpayers but also the officers, aiding in optimizing the GST cancellation procedure.
CBIC GST Circular 69/43/2018 dt. 26/10/2018: Clarifications on GST Registration Cancellation Procedure