GST Registration Cancellation Must Adhere to Objective Criteria and Provide Clear, Substantive Reasoning for Retrospective Action

HC held that retrospective GST registration cancellation requires objective criteria and proper reasoning. The court modified the cancellation order from the original retrospective date to 23.12.2022, allowing tax authorities to take lawful action. The decision emphasized the need for cogent reasons when cancelling registration, considering potential impacts on input tax credit and ensuring procedural fairness.

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Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasoning in the impugned order.

Retrospective cancellation of GST registration:
The petitioner challenged the show cause notice and order cancelling their GST registration retrospectively from 02.07.2017. The court noted that the impugned order lacked reasoning and referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows cancellation of registration retrospectively based on objective criteria, not subjectively. The court emphasized that registration cannot be cancelled with a retrospective date if the taxpayer was compliant without cogent reason. The court also highlighted that cancelling registration with retrospective effect affects customers' input tax credit, requiring the proper officer to consider this consequence before making such a decision. Considering that the petitioner no longer wished to continue the business, the court modified the order to cancel the registration from 23.12.2022, allowing the respondent to take further lawful action, including retrospective cancellation, with proper notice and hearing.

Lack of reasoning in the impugned order:
The court observed that the order cancelling the GST registration did not provide any reasoning and merely referenced the show cause notice. Emphasizing the importance of providing reasons for administrative decisions, the court modified the order to specify the effective date of cancellation as 23.12.2022. The court allowed the respondent to proceed with recovery of any tax, penalty, or interest due from the petitioner in accordance with the law.

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