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Simply Understanding Suspension, Cancellation and Revocation of GSTIN

There had been whole lot of confusion amongst the taxpayers and the consultants as to when can a GSTIN be suspended, what are its consequences, when it can be further cancelled and what is the process of revocation of GSTIN. Most of the time it is also seen consultants find it difficult to draft the appeals once the application for revocation has been rejected. Let us understand them one by one:

Suspension of GSTIN:

Suspension is nothing but a temporary disablement of the taxpayer. This would mean that for the tine being a GSTIN is suspended, the taxable person shall be treated like an unregistered person. He shall neither be permitted to make any supplies, nor he can collect any tax or issue tax invoice or claim any refund during the period of suspension. The suspension of number takes place under two circumstances:

  1. Application for Cancellation of Registration by taxpayer,
  2. Suo-motto suspension of GSTIN by the department as per circumstances prescribed under Section 29 of CGST Act 2017.

The suspension of GSTIN does not mean that it cannot be retrieved, it simply means that till the time cancellation proceedings are not completed, the activities of persons are temporarily stopped. It is merely a pro-active action by the department to prevent bigger fraud/default by the person. During the period of suspension, taxpayer shall not be required to do any compliances i.e. he will not be required to file any returns.

Cancellation of GSTIN:

As we discussed, suspension of GSTIN is a temporary arrangement while cancellation proceedings are pending, on the other hand cancellation of GSTIN is when the number is cancelled permanently, and the person is treated as unregistered. It is not a temporary disablement. Once the number is cancelled for reasons prescribed under section 29 of CGST Act 2017, the taxable person cannot do any activity. The only option he is left with is to apply for revocation of cancellation of number with the proper officer.

Once the GSTIN is cancelled, department may initiate the demand and recovery proceedings and may ask the taxpayer to set-off the ITC in the ledger against the liability pertaining to stock/ capital goods and fixed assets in the possession of the taxpayer on the date of cancellation of GSTIN.

Revocation of Cancellation:

Once the GSTIN is cancelled and FORM GST REG 20 has been issued, the taxpayer shall have an option to apply for revocation of GSTIN in FORM GST REG 21 within 30 days of cancellation of GSTIN. Recently vide Notification No 34/2021-Central Tax dated 29.08.2021, extension has been provided to the taxpayers whose GSTIN has been cancelled during 1st March 2020 to 31st August 2021, can apply for revocation of GSTIN up to 30th September 2021. This would mean that if your client’s GSTIN has been cancelled within the said period, the window for application for revocation is still open. Once the application for revocation is filed, the proper officer will either accept the application and revoke the cancellation or he may issue a Show Cause Notice, against which taxpayer shall be required to file a reply within 7 days of issue of Show Cause Notice. The opportunity of being heard shall be rendered to the taxpayer. Where the proper officer is satisfied with the reply, he may proceed with the revocation of cancellation otherwise he shall cancel the number.

Where GSTIN whose cancellation has been revoked was cancelled with retrospective effect, the taxpayer shall be required to file all the returns i.e. GSTR 1 and GSTR 3B for the period from date of cancellation of GSTIN to date of revocation of cancellation within 30 days of revocation. For example: Where the GSTIN was cancelled with effect from June 2020 and the order of revocation is issued in August 2021, the taxpayer shall be required to file all the returns for the period of June 2020 to August 2021 within 30 days of order of revocation. It may be noted that during the period of cancellation or suspension, the eway bill portal also remains suspended. The practice of selling goods with invoices less than Rs. 50,000 to avoid e-way bill is illegal and is not advised.  

What after the cancellation of GSTIN?

In most of the cases it is seen that the application of revocation is rejected without any sufficient reasons. Under these circumstances, consultants usually advise their clients to apply for new GSTIN which is also not issued as upon new application, department could retrieve that GSTIN was cancelled on the said PAN number. In such a case, where the GSTIN has been cancelled without proper reasons, the consultants can choose to file an appeal against the order of cancellation within 3 months of communication of cancellation order. Such an appeal must be drafted with utmost caution, and it is advised that the help of an experts like Unitax can save lot of time and efforts for the consultants.

Though there is an option to file an appeal, it is matter of concern that till the time appeal is heard and finally decided, the taxpayer’s business comes to total halt as he is not permitted to operate with the cancelled GSTIN. Unfortunately, GST law does not provide for any alternative remedy for carrying out the operations till the time appeal is finally decided. During this while, the taxpayer may move an application for early hearing and may request the appellate authority to issue order for revocation or stay on cancellation till the disposal of appeal. In cases where even that is not possible and process is impairing the operations of business, the taxpayer may opt for alternative remedies of creating new firm or operate under any other PAN on temporary basis.  

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