CANCELLATION OF GST REGISTRATION

[DR.MARIAPPAN GOVINDARAJAN]

When the GST registration is cancelled what would be the impact on business. Whether they can levy GST on the supplies made by the business entity? If GST is levied registration is compulsory. Whether the business entity may be punished for levy of GST in the absence of registration certificate? There is no clear provision in this regard in the Act as well as in the Rules made thereunder.

Kindly throw light on this issue.

[VENU K]

Sec 76 can be invoked and such tax collected and not paid to Government can be recovered with interest and a penalty equivalent to the amount specified in the notice can be collected. Sub Sections 1, 2 and 4. Further Penalty Section 122 (iv) specifically could be imposed in such case in my opinion.

Further Sec 76 does not specify any time limit for issue of notice which means such amounts could be recovered any time by giving a notice and making an assessment within one year of date of service of such notice. Please note that Sec 76 overrides all laws as per the non obstante clause.

[DR.MARIAPPAN GOVINDARAJAN]

Section 76 can be invoked when a business entity collects tax but not remit the same to the Department.  My question is as to whether the business entity can collect GST and issue invoice after cancellation of registration, in the absence of registration.  

[VENU K]

Section 32 Prohibition of Unauthorized Collection of Tax

Sec 32(1) Says that a person who is not a registered person shall not collect in respect of a supply of goods or services or both any amount by way of tax under this Act.

If tax is collected in violation of this section penalty can be imposed. Sec 76 can be invoked for recovery of such unauthorised collection of tax..

Further only a registered person supplying taxable goods can issue a tax invoice as per Sec 31

[Shilpi Jain]

By cancelling registration the department is hurting itself with its own stick (apne hi pair pe kulhadi marna!!).

Even after so many HCs have passed orders, department does not stop doing this.

[DR.MARIAPPAN GOVINDARAJAN]

The views of Shilphi Jain is correct.  Once cancelled whether concerned person will be unregistered person.  Therefore he may not levy GST.  But he is having turnover eligible for registration.  Failure to get registration or levying of GST without registration is not allowed.  Then how he will run the business? Where is the ease of doing business?  Instead of cancellations fine or penalty imposed.  Logically once registration is cancelled he cannot run business.  The GST council has to consider this issue.

[KASTURI SETHI]

Dear Sir,

It is a fact that Govt. will suffer a huge loss of revenue due to cancellation of registration because the person whose registration is cancelled and in the event of rejection of revocation of cancelled registration his business will continue. Cancellation of registration is a capital punishment for a registered tax payer.  Here in the present scenario it is pertinent to peruse the following judgement :-

2023 (10) TMI 929 - MADRAS HIGH COURT - ABDUL SAMAD MOHAMED INAYATHULLAH VERSUS THE SUPERINTENDENT OF CGST AND C. EXICSE, TIRUCHIRAPPALL

[Vijay kumar]

In my view, we cannot generalize the issue. Fake registrations involving fraudulent passing of ITC need to be cancelled ab initio. If a TP wants his business running, he should file his returns. If he doesn't file returns for six months, what regard he has for the law? Govt gets revenue only when cash tax is paid. Many TPs adjust revenue from ITC, some of which are genuine and some fraudulent. Latter should be weeded out, as a policy.. They are no way useful for the nation, on the other hand, they harm the economy and the country.

[KASTURI SETHI]

Sh.Vijay Kumar Ji,

Your views are full of substance but on the other hand, all are not dishonest. The whole house cannot be painted with the same brush. It is jurisdiction of the Court to decide who has acted in bona fide manner and who has acted in a mala fide manner.

[Yash Shah]

There is the following impact on business if registration is cancelled 

As per section 16(1), only a registered person can claim the ITC of their inward supply if registration has been cancelled, he shall not entitled to claim the ITC and it will lead to extra cost to business.

As per section 32(1) of the CGST act, "A person who is not registered shall not collect in respect of any supply of goods or service or both any amount by way of tax under this Act. 

As per section 76 of the CGST act, every person who has collected from any other person any amount as representing the tax and not paid to the government after considering any representation made by him determine the amount dues from him and thereupon he shall pay the amount so determined and also pay interest thereon at the rate specified under section 50 from the date he collected such amount to the date he pays such amount to the Government.

As per section 125 of the CGST act, Any person, who contravenes any of the provisions of this act or rules made thereunder for which no penalty is separately provided for this act, shall be liable to a penalty which may extend to twenty-five thousand rupees.

Therefore, as per the analysis of section 32, a person without a registration certificate can not levy the GST and is liable to penalty under section 125 of the CGST act as an unregistered person levies GST which is in contravention of section 32 of the CGST act and also as per section 76 if a person fails to pay the government any amount that is collected as a tax shall be liable to pay such amount with interest thereon.

AI Summary

Unauthorized collection of GST is prohibited: cancelled registration bars charging tax and triggers recovery and penalties. Cancellation of GST registration bars a person from collecting tax or issuing a tax invoice (Section 32 and Section 31). Unauthorized collection exposes the person to recovery under Section 76-requiring payment of collected amounts with interest-and to penalties under Section 125. Cancellation also disqualifies the person from claiming input tax credit under Section 16(1), increasing business costs and raising policy concerns about distinguishing fraudulent registrations from bona fide noncompliance.