The CBIC vide Notification No. 94/2020-Central Tax, dated 22-12-2020 has issued Central Goods and Services Tax Rules (Fourteenth Amendment), 2020, wherein interalia it has amended Rule 21 of the CGST Rules, 2017 in regard to cancellation of GST registration
For ready reference of of our readers the amendment is discussed as under:
Insertion of clause (e), (f) and (g) in Rule 21 of the CGST Rules,2017
Rule 21 of the CGST Rules, 2017 mandates situations where the registration granted to a person is liable to the cancelled.
By Notification No. 94/2020-Central Tax, dated 22-12-2020 clause (e), (f) and (g) has been inserted in Rule 21 of CGST Rules,2017. These clauses are discussed as under:
Cancellation in case of excess ITC is availed (Clause (e))
Now the officer can proceed for cancellation of GSTIN where a taxpayer avails Input Tax Credit (ITC) exceeding the permissible amount of ITC, which is in violation of the provisions of section 16 of the CGST Act and rules made thereunder.
It may be noted here that due to above amendment, in case a taxpayer has availed credit in respect of invoices not appearing in GSTR-2A / 2-B in excess of 10% (reduced to 5% from 01-01-2020) or has availed ITC without actual receipt of goods etc the GST registration of such taxpayer can be cancelled by the Department.
Cancellation if GSTR-3B liability less than that declared in GSTR-1
The said clause talks about synchronization / reconciliation between GSTR 1 and GSTR 3B. Department can now cancel registration where the Outward tax liability declared in GSTR 3B is lesser than the Outward tax liability declared in GSTR 1 for one or more tax period.
This is also a big power given to Department as in many cases especially in cases of SMEs due to non reconciliation differences do occur between GSTR-1 and GSTR-3B now this can lead to cancellation of GST registration.
Thus before filing GSTR-3B the taxpayer should match the same with the same with the output liability as disclosed in GSTR-1 and ensure that tax liability disclosed in GSTR-3B is equal or more than figure as disclosed in GSTR-1 to avoid any action by the Department.
Cancellation if new Rule 86B is violated (Clause (g))
As per newly inserted clause (g), GST registration can be cancelled if new Rule 86B of the CGST Rules,2017 which is also a new rule regarding restriction on use of amount available in electronic credit ledger. For details regarding Rule 86B click here
Will GST registration be cancelled even if there is clerical error in filing returns
In this regard CBIC has clarified that only in fraudulent cases where there are significant discrepancies based on data analytics and sound risk parameters , and not mere clerical errors , the action of suspension and cancellation will be taken up . For further details Click Here
Amended Rule 21 of the CGST Rules, 2017
The amended Rule 21 of the CGST Rules,2017 after the above amendment w.e.f. 22nd December 2020 is reproduced below:
“21. Registration to be cancelled in certain cases.-
The registration granted to a person is liable to be cancelled, if the said person,-
(a) does not conduct any business from the declared place of business; or
(b) issues invoice or bill without supply of goods or services or both in violation of the of the provisions of the Central Goods and Services Tax Act, 2017 (“CGST Act”) or the rules made thereunder ; or
(c) violates the provisions of section 171 of the Act or the rules made thereunder
(d) violates the provision of rule 10A
(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or
(g) violates the provision of rule 86B.”
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
