GST Rulings

Can retrospective cancellation of GST registration be mechanical?

Judgment of the High Court of Delhi

[dated May 20, 2024 from WP (C) No. 5264 of 2024 in Ravi Parkash Goel v. Sales Tax Officer]

In terms of Section 29(2) of the CGST Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. However, registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer's registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

One of the consequences of cancelling a taxpayer's registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. The taxpayer's contention is required to consider this aspect while passing an order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

In view of the foregoing, wherein the Petitioner does not seek to carry on business or continue the registration, the impugned order was modified to the limited extent that registration shall be treated as cancelled only with effect from the date when petitioner filed an application seeking cancellation of GST registration.

Comments

Numerous orders are passed for cancellation of registration with retrospective effect, without stating any reasons therefor. This happens owing to the absence of defined guidelines in this regard. While some of the taxpayers may be able to approach the Writ Court, there are many others who cannot afford to do so. Further, the latter's recipients face challenge with regard to ITC claim. Hence, it is prudent on the part of the Executive to roll out detailed guidelines in case of retrospective cancellation.

Srinivasan V, Advocate

Recent Posts

P&H HC issues detailed guidelines on ITC denial for supplier’s non-payment

Background According to Section 16(2)(c) of the CGST Act, if tax charged in respect of…

3 weeks ago

Can consequential refund, arising from OIA, be rejected by OIO?

Background Order-in-Original (OIO, which partly rejected refund) was set aside by Order-in-Appeal (OIA). Fresh refund…

1 month ago

Inviolable principles governing Section 74 proceedings

"But for the audit undertaken by the Department, the suppression of facts would have gone…

1 month ago

Non-response to SCN & DRC01A construed as suppression: Madras HC

Background Intimation in DRC-01A and Show Cause Notice (SCN) were issued. The Petitioner failed to…

3 months ago

HC quashes GST notice & order for non-quantification of interest in notice

Issue The show cause notice issued to the Petitioner did not quantify the proposed demand…

6 months ago

Is limitation period of 2 years applicable to duplicate payments under GST law?

Issue The petitioner in the citation referred first infra, by mistake, made a duplicate payment…

7 months ago