Retrospective GST registration cancellation requires reasons and a sustainable basis when the taxpayer has already applied for cancellation.

GST registration cannot be cancelled retrospectively without reasons showing why backward operation is necessary, especially where the taxpayer had already sought cancellation and the delayed clarification under Rule 21A(2A) does not support such effect. The High Court found the stated ground of non-filing of returns for six months inconsistent with a cancellation request already on record, and held that the retrospective cancellation was unsustainable. The cancellation was therefore confined to the date of the application for cancellation, and the order was modified accordingly.

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Issues: Whether the GST registration could be cancelled with retrospective effect from 1 July 2017 notwithstanding the delayed clarification and the absence of reasons for such retrospective cancellation.

Analysis: The application for cancellation had been made first, and the clarification was sought much beyond the time contemplated under Rule 21A(2A) of the Central Goods and Services Tax Rules, 2017. The order cancelling registration with retrospective effect did not disclose any reason justifying retrospective operation, and the ground in the show cause notice that returns had not been filed for six months could not logically sustain cancellation from a period after the taxpayer had already sought cancellation. The basis for retrospective cancellation was therefore unsustainable.

Conclusion: The retrospective cancellation was not upheld, and the effective date of cancellation was confined to 28 March 2022, the date of the cancellation application, in favour of the assessee.

Final Conclusion: The impugned cancellation order stood modified so that the GST registration was cancelled only from the date of the cancellation application, and the petition was disposed of on that basis.

Ratio Decidendi: Retrospective cancellation of GST registration must be supported by reasons and a legally sustainable basis, and it cannot be imposed where the statutory process was delayed and the stated ground is inconsistent with the taxpayer's prior cancellation request.

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