GST Registration Cancellation During COVID-19: Authorities Must Consider Objective Criteria and Preserve Taxpayer Rights Under Rule 21

SC examined a GST registration cancellation case where the petitioner sought cancellation due to business closure during COVID. The court rejected the retrospective cancellation, modifying the order to make the cancellation effective from the suspension date. The judgment emphasized providing necessary details to authorities and ensuring objective criteria for registration cancellation, while preserving parties' rights and tax-related contentions.

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Issues:
The issues involved in this case are the rejection of the application for cancellation of GST registration and the subsequent cancellation of registration with retrospective effect.

Rejection of Application for Cancellation of GST Registration:
The petitioner sought cancellation of registration due to business closure during the COVID period. However, the application was rejected as the petitioner failed to provide details regarding stock position, value of raw material, and capital goods. The rejection was based on the authority's need for information to determine liability under Section 29(5) of the Central Goods Services Tax Act, 2017.

Cancellation of Registration with Retrospective Effect:
The registration was cancelled with retrospective effect, which was challenged by the petitioner. The court noted that cancellation with retrospective effect should be based on objective criteria and not merely due to non-filing of returns. Cancelling registration with retrospective effect affects customers' input tax credit, so the proper officer must consider this consequence. The court modified the order to make the cancellation effective from the date of suspension, i.e., 02.09.2021.

The judgment emphasizes the importance of providing necessary details to the authority when seeking cancellation of GST registration. It also clarifies that retrospective cancellation should be based on objective criteria and consideration of consequences for customers' input tax credit. The court modified the order to ensure fairness and specified that all rights and contentions of the parties are reserved, without commenting on the merits of stock position or tax payments.

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