Non-filing of the returns does not empower the GST Authorities to cancel the registration retrospectively

In some cases, such is the interpretation of some of certain field officers that SCNs flow to recipients of earlier supplies, even after a prospective cancellation/suspension of registration of suppliers after the date of such supply. Hence, retrospective cancellation would certainly involve denial of ITC of recipients who have received supplies before the cancellation/suspension of registration. However, It seems that for certain GST field officers cancellation of registration means retrospective cancellation – something which has serious ramifications.

Section 29 of the CGST Act, 2017, grants discretionary powers to the concerned authority to cancel the registration from a retrospective date. However, such powers have to be exercised only in eligible cases. Cancellation on grounds that the petitioner had not filed the returns for a continuous period of six months does not justify retrospective cancellation from the date when the registration was granted. Where the taxpayer has closed its business altogether and thereafter stopped filing returns, a stand cannot be taken by the dept. to cancel the GST registration retrospectively thereby even making the earlier supplies of the taxpayer irregular.

It’s a simple case when one reads the order in hindsight but it had to be contested by the taxpayer in High Court and a decree taken in the case of ASHISH GARG PROPRIETOR SHRI RADHEY TRADERS Vs ASSISTANT COMMISSIONER OF STATE GOODS AND SERVICE TAX, DELHI ZONE 7 WARD 82 [2023 (7) TMI 1229 - DELHI HIGH COURT