GST Cancellation with recent amendments in GST Laws

The recent notification of the Central Board of Indirect Tax and Custom has amended Rule 22 that prescribes the cancellation of registration in the 14th amendments of Central Goods and Service Tax Rules, 2020.

New Amendments

While talking about the new insertion in Rule 21 of CGST Rule 2020, new clauses are added that will be discussed below:

Previously, Rule 21 of CGST Rule, 2017 deals with registration given to the person shall be liable to be cancelled if the person:

  1. Does not functions any business from the mentioned place of business
  2. Issues fake invoice or bill without any supply of goods or services
  3. Violates Anti-profiteering provisions
  4. Violations of the provisions of rule 10A in regards to providing the details of the bank account.

Whereas, in the latest amendment clause (E) (F) & (G) has been inserted and explained as under:

(E)  The GST registration shall be cancelled if a person avails input tax credit in violation of the provision of section 16 of CGST Act, 2017 that provides the restrictions and conditions on the taxable person in terms of the input tax credit.

(F) If the person provides the details of outward supplies in Form GSTR-1 for one more tax period that are also in the excess of the outward supplies furnished by him in GSTR-3B. Then, GST registration of the same person shall be cancelled.

(G) If any provision of Rule 86B is violated, then also GST registration can be cancelled.

Hence, apart from the existing provision, the GST registration shall be cancelled on the new inserted grounds as mentioned above.

Rule 86B has been inserted that states about the registered person whose value of taxable supply other than exempt supply and export, in a month exceeds fifty lakh rupees are not authorised to use Input Tax Credit over 99% of output tax liability.

The Exception to This Rule

  • When a person has deposited more than Rs. 1 lakh Income Tax as per the provision of Income Tax Act, 1961 in the last two financial years or
  • When a person has received a refund of more than Rs. 1 Lakh in the previous financial year in terms of an account of export under Letter of Undertaking or inverted tax structure.
  • The taxable person has discharged his output tax liability in cash in the current financial year which is more than 1% of the total output tax liability.
  • The rule shall not apply to Government department, Public Sector Undertaking and other local authority.

Rule 22A (2) of CGST Rules, 2020

This rule state, when a Proper Officer (PO) has a valid reason to believe that the registration of the person is liable to be cancelled. Then a Proper Officer may suspend the registration of the person with effect from date as decided by him, till the completion of the proceedings for cancellation of registration.

Sub Clause 21A (2A) – in the new insertion of this sub-clause, when, we talk about the comparison of the GSTR-3B of the taxable person in accordance to the details of outward supplies provided in the Form GSTR-1 OR if the details of GSTR 2A and 2B inward supplies derived pertaining to details of outward supplies provided by his suppliers in their Form GSTR-1.

Therefore, the GST registration of the taxable person shall be cancelled or suspended, if there is difference of GSTR-3B with GSTR-1 OR GSTR 2A and 2B, the taxable person shall provide his reply within 30 days of the notice.

Procedure for GST Cancellation

The Proper Officer may at any time application filed by taxable person cancel the registration in the following situation:

  • If the business is discontinued, transferred, death of proprietor or ventured with other legal entity and demerged or disposed off,
  • Change in the business constitution
  • The only Voluntarily registered person shall be registered
  • If any provision is violated by the taxable person
  • A person who is paying tax under Section 8 of the CGST Act, 2017 that talks about the composite supply and has not filed three returns from the consecutive tax period.
  • A taxable person who has not filed the return for the past six months
  • In the case, where registration is obtained by the means of fraud, wilful misconduct or suppression of fact than Proper Officer may cancel the GST registration with retrospective effect.
  • In such a situation, the non-resident taxpayer’s liability to pay tax shall not be affected.
  • All the Non-resident taxpayers whose registration is cancelled have to pay tax liability by way of debit balance in electronic cash ledger which is equivalent to the credit of input tax kept in the stock of raw material, semi-finished or finished goods on the day of cancellations or the output tax payable which is higher.

How the revocation of GST cancellation can be done?

  • For cancellation of registration by Proper officer at his discretion, the non-resident taxpayer may apply for the revocation of cancellation within 30 days from the date of issuing of cancellation order not after that.
  • It is the sole discretion of the Proper Officer to revoke the order or reject the application after reading it.
  • Therefore, the non-resident taxpayer shall be given a reasonable time for presenting his case.


As of December 22 2020, the Amended Rule 21 of the CGST Rules would be read as: The registration will be cancelled in the particular cases mentioned below:

  • If a person does not perform business from the declared place of his business then the registration granted to that person would be cancelled.
  • One would be violating the provisions of the Central Goods and Services Tax Act, 2017 (“CGST Act”) if invoice or bill without supply of goods or services or both is issued.
  • If one violates the provisions of Section 171 of the Act or the rules made thereunder.
  • The Provision of Rule 10A should not be violated
  • One should not violate the provisions of Section 16 of the Act or the rules made thereunder.
  • Provisions of the rule 86B should not be violated.
  • Information on details of outward supplies in Form GSTR-1 under section 37, should not be furnished.

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