Section 29 of the Central Goods and Services Tax Act, 2017 deals with the cancellation or suspension of GST registration. It explains when a GST registration can be cancelled, who can initiate the cancellation, the circumstances in which the proper officer can cancel registration, and what happens to the taxpayer’s liabilities after cancellation.
GST registration is not necessarily permanent. A business may close, transfer its business, undergo a change in constitution, or become no longer liable to remain registered. In such cases, the registered person can seek cancellation. On the other hand, the proper officer can cancel registration where prescribed conditions or non-compliances are found.
Section 29 also provides for suspension of registration while cancellation proceedings are pending. The detailed procedure is contained in Rules 20, 21, 21A and 22 of the CGST Rules, 2017.
What is Section 29 of the CGST Act?
Section 29 is titled “Cancellation or suspension of registration.”
The provision allows the proper officer to cancel GST registration:
- on his own motion;
- on an application filed by the registered person; or
- on an application filed by the legal heirs of a registered person in case of death.
The section also permits suspension of registration during pending cancellation proceedings in the circumstances and manner prescribed under the GST Rules.
Section 29 is therefore important for both taxpayers who want to close or cancel their GST registration and tax officers dealing with registration-related non-compliance.
When Can a Registered Person Apply for Cancellation of GST Registration?
Section 29(1) covers circumstances in which registration may be cancelled on the application of the registered person or, in the case of death, by the legal heirs.
1. Discontinuation of Business
A registered person can seek cancellation when the business has been discontinued.
For example, if a proprietor permanently closes a taxable business and does not intend to continue the business, the person can apply for cancellation of the GST registration.
2. Transfer of Business
Cancellation can also arise where the business is transferred fully for any reason.
The section specifically covers situations such as:
- transfer of business;
- sale or disposal of business;
- transfer following the death of the proprietor;
- amalgamation with another legal entity; and
- demerger.
The exact GST consequences depend on the nature of the transaction and the entities involved.
3. Death of Proprietor
Where the registered person is a proprietor and dies, the legal heirs can apply for cancellation.
Section 29 expressly permits an application by the legal heirs in such circumstances.
4. Change in Constitution of Business
A change in the constitution of a business is another circumstance covered by Section 29(1).
However, taxpayers should distinguish between a change that can be dealt with through amendment of registration and a change that requires cancellation and fresh registration.
Where the change in constitution results in a change of PAN, the existing GST registration cannot simply be amended and fresh registration may be required under the registration rules.
5. No Longer Liable to Registration
Section 29(1)(c) also covers a taxable person who is no longer liable to be registered under Section 22 or Section 24.
The current provision also covers a person who intends to opt out of registration that was voluntarily obtained under Section 25(3).
Application for Cancellation of GST Registration
The detailed procedure for taxpayer-initiated cancellation is prescribed under Rule 20 of the CGST Rules.
A registered person seeking cancellation under Section 29(1) generally has to submit an electronic application in FORM GST REG-16.
The application includes relevant details such as:
- stock of inputs;
- inputs contained in semi-finished goods;
- inputs contained in finished goods;
- capital goods held in stock;
- liability arising in relation to such stock;
- payment made against the liability, where applicable; and
- supporting documents, where required.
The application is generally required to be submitted within 30 days of the occurrence of the event warranting cancellation.
Example
Suppose a trader permanently closes the business on 31 March.
The trader should determine the applicable cancellation date, review the stock and capital goods position, calculate the amount payable under the GST law and submit the cancellation application in the prescribed form.
Can a Voluntarily Registered Person Cancel GST Registration Immediately?
There is an important rule concerning voluntary registration.
Rule 20 provides that an application for cancellation of a voluntarily obtained registration is not to be considered before the expiry of one year from the effective date of registration.
Therefore, a person who voluntarily obtained GST registration should consider this restriction before applying for cancellation.
Cancellation by the Proper Officer
GST registration can also be cancelled by the proper officer on his own motion.
Section 29(2) permits cancellation from a date determined by the proper officer, including a retrospective date, where the statutory and prescribed conditions are satisfied.
The major grounds under Section 29(2) are discussed below.
Grounds for Cancellation Under Section 29(2)
1. Contravention of GST Law
The proper officer may cancel registration where a registered person has contravened provisions of the CGST Act or the Rules that are prescribed as grounds for cancellation.
The detailed circumstances are supplemented by Rule 21 of the CGST Rules.
2. Non-Filing of Return by a Composition Taxpayer
Section 29(2)(b) applies to a person paying tax under the composition scheme under Section 10.
The current provision provides for cancellation where the composition taxpayer has not furnished the return for a financial year beyond three months from the due date of furnishing that return.
This is an important current-law point because older GST articles often reproduce the earlier wording of Section 29(2)(b), which referred to three consecutive tax periods.
The statutory wording was changed with effect from 1 October 2022.
3. Non-Filing of Returns by Other Registered Persons
Section 29(2)(c) applies to registered persons other than those covered by clause (b).
The section now refers to the continuous tax period prescribed by the Rules, rather than directly stating a fixed six-month period.
Under the current Rule 21 framework, the prescribed period depends on the return-filing arrangement. Rule 21 provides for cancellation where:
- a person required to furnish returns monthly under Section 39(1) has not furnished returns for a continuous period of six months; or
- a person required to furnish returns quarterly under the applicable proviso to Section 39(1) has not furnished returns for two continuous tax periods.
Therefore, the commonly repeated statement that every regular taxpayer is automatically cancelled after six months should not be treated as a complete description of the current rules.
4. Voluntary Registration but Business Not Commenced
A person who voluntarily obtained GST registration under Section 25(3) may face cancellation where the business has not commenced within six months from the date of registration.
This provision is intended to address situations where a person obtains voluntary registration but does not actually commence the business.
5. Registration Obtained Through Fraud or Misstatement
GST registration can also be cancelled where the registration was obtained by:
- fraud;
- wilful misstatement; or
- suppression of facts.
However, the proper officer cannot cancel the registration on these grounds without giving the person an opportunity of being heard.
This hearing requirement is an important procedural safeguard under Section 29.
Additional Grounds Under Rule 21
Section 29(2)(a) works together with Rule 21 of the CGST Rules.
Rule 21 contains specific circumstances in which a GST registration is liable to cancellation. The current rule includes situations such as the following.
Business Not Conducted From Declared Place
Registration may be liable to cancellation where the registered person does not conduct any business from the declared place of business.
Invoice Issued Without Actual Supply
Registration may be liable to cancellation where a person issues an invoice or bill without a corresponding supply of goods or services, in violation of the GST law or rules.
Violation of Section 171
Violation of Section 171 of the CGST Act or the relevant rules is also listed as a ground under Rule 21.
Violation of Rule 10A
Contravention of Rule 10A is another prescribed ground for cancellation.
Rule 10A deals with furnishing bank account details after registration within the prescribed framework.
Wrong Availment of Input Tax Credit
Rule 21 covers cases where a registered person avails input tax credit in violation of Section 16 or the relevant rules.
Difference Between GSTR-1 and Return Figures
The current Rule 21 also addresses situations where outward supplies reported in FORM GSTR-1, including GSTR-1A where applicable, exceed the outward supplies declared in the valid return under Section 39 for the relevant tax periods.
Violation of Rule 86B
Violation of Rule 86B is also included among the prescribed circumstances under Rule 21.
Return Default
Rule 21 separately provides for cancellation for specified periods of non-filing of monthly or quarterly returns, depending on the taxpayer’s applicable return-filing arrangement.
What is Suspension of GST Registration?
Suspension and cancellation are not the same thing.
Cancellation brings the GST registration to an end from the applicable effective date.
Suspension temporarily restricts the operation of the registration while the cancellation proceedings are pending.
Section 29 permits suspension during cancellation proceedings, while Rule 21A provides the detailed mechanism.
Suspension may occur in the following situations.
Suspension After Applying for Cancellation
Where a registered person applies for cancellation under Rule 20, the registration is deemed to be suspended from the later of:
- the date on which the cancellation application is submitted; or
- the date from which cancellation is sought.
The suspension continues pending completion of cancellation proceedings under Rule 22.
This means that filing a cancellation application can itself result in suspension during the pending cancellation process.
Suspension by the Proper Officer
Where the proper officer has reasons to believe that a person’s registration is liable to cancellation under Section 29 or Rule 21, the officer may suspend the registration pending completion of the cancellation proceedings.
The current Rule 21A contains this mechanism and also provides for suspension in specified cases involving significant differences or anomalies in return and supply information.
Suspension Due to Differences or Anomalies
Rule 21A(2A) provides for suspension in certain circumstances where comparison of information shows significant differences or anomalies indicating a possible contravention that may lead to cancellation.
The rule specifically refers to comparison involving:
- returns furnished under Section 39;
- outward supplies reported in GSTR-1 or GSTR-1A, where applicable;
- inward supply information derived from suppliers’ GSTR-1 or GSTR-1A; and
- other analysis that may be carried out on the recommendations of the GST Council.
Rule 21A(2A) also covers specified contravention of Rule 10A.
In such circumstances, the taxpayer is intimated through FORM GST REG-31 and is asked to explain within 30 days why the registration should not be cancelled.
What Happens During Suspension?
A registered person whose registration has been suspended under the relevant provisions of Rule 21A:
- cannot make taxable supplies during the suspension period; and
- is not required to furnish returns under Section 39 during the suspension period in the circumstances covered by the rule.
The rule explains that “shall not make any taxable supply” means that the registered person should not issue a tax invoice and consequently should not charge tax on supplies during the suspension period.
For suspensions under Rule 21A(2) or 21A(2A), the rule also provides that a refund under Section 54 is not to be granted during the suspension period.
How is Suspension Revoked?
Rule 21A provides that suspension is generally deemed to be revoked when the cancellation proceedings under Rule 22 are completed, with the revocation effective from the date on which the suspension came into effect.
The proper officer may also revoke the suspension during the pending cancellation proceedings where the rule permits and the officer considers it appropriate.
In specified cases involving return defaults, Rule 21A further provides for deemed revocation of suspension upon furnishing all pending returns where the registration has not already been cancelled.
Procedure for Cancellation of GST Registration by Taxpayer
The taxpayer-initiated cancellation procedure can be understood as follows.
Step 1: Identify the Reason for Cancellation
The taxpayer should determine the reason for cancellation, such as:
- closure of business;
- transfer of business;
- death of proprietor;
- change in constitution;
- no longer being liable for registration; or
- opting out of voluntary registration where permitted.
Step 2: Review Stock and ITC
The taxpayer should determine the stock of:
- inputs;
- inputs contained in semi-finished goods;
- inputs contained in finished goods; and
- capital goods.
These details are relevant to the amount payable under Section 29(5).
👉 Read More → Section 30 – Revocation of cancellation of registration
Step 3: Calculate Applicable Liability
The taxpayer should determine the amount payable on cancellation according to Section 29(5) and the prescribed rules.
Step 4: File FORM GST REG-16
The cancellation application is filed electronically in FORM GST REG-16 under Rule 20.
Step 5: Complete Remaining Compliance
The taxpayer must continue to deal with applicable returns, tax liabilities and other statutory obligations relating to the period before cancellation.
Procedure When the Officer Initiates Cancellation
Where the proper officer has reasons to believe that registration is liable to cancellation, Rule 22 provides the procedure.
Step 1: Show Cause Notice
The proper officer issues a show cause notice in FORM GST REG-17.
The notice requires the registered person to explain why the registration should not be cancelled. The prescribed reply period is seven working days from the date of service of the notice.
Step 2: Reply to Notice
The registered person can furnish a reply in FORM GST REG-18 within the prescribed period.
The reply should address the grounds stated in the notice and provide relevant explanations and documents.
Step 3: Proceedings May Be Dropped
If the reply is found satisfactory, the proper officer can drop the cancellation proceedings through FORM GST REG-20.
In specified return-default cases, furnishing all pending returns and paying the applicable tax, interest and late fee can also result in the proceedings being dropped in accordance with Rule 22.
Step 4: Cancellation Order
Where cancellation is warranted, the proper officer issues the cancellation order in FORM GST REG-19.
The order can specify the effective date of cancellation and direct payment of applicable arrears, including the amount payable under Section 29(5).
Can GST Registration Be Cancelled Retrospectively?
Yes.
Section 29(2) expressly permits the proper officer to cancel registration from a date that may include a retrospective date, where the statutory conditions are satisfied.
However, retrospective cancellation is not the same as saying that every cancellation will automatically operate from an earlier date.
The effective date depends on the circumstances, the applicable grounds and the cancellation order.
Retrospective cancellation can have significant consequences for:
- tax liabilities;
- returns;
- input tax credit;
- supplies made during the affected period; and
- recipients who may have relied on invoices issued during that period.
Therefore, the effective date mentioned in the cancellation order is particularly important.
Does GST Cancellation Remove Previous Tax Liability?
No.
This is one of the most important aspects of Section 29.
Section 29(3) clearly provides that cancellation does not affect the liability of the person to:
- pay tax;
- pay other dues under the GST law; or
- discharge obligations under the Act or Rules
for any period before the date of cancellation.
This remains applicable whether the tax and other dues are determined before or after the cancellation.
Example
Suppose a business’s GST registration is cancelled on 30 September.
Later, an assessment or other proceeding determines that GST was payable for an earlier tax period.
The cancellation of registration does not remove that liability.
The taxpayer can still be required to pay the applicable tax, interest, penalty or other dues according to law.
Cancellation Under State GST or UTGST and CGST
Section 29(4) provides a coordination mechanism between the GST laws.
Where registration under the applicable State Goods and Services Tax Act or Union Territory Goods and Services Tax Act is cancelled, the cancellation is deemed to be cancellation under the CGST Act as well.
This ensures that the corresponding registration does not continue separately under the central component merely because cancellation has occurred under the State or Union Territory GST law.
Tax Consequences of Cancellation Under Section 29(5)
Cancellation can have consequences for input tax credit relating to stock and capital goods.
Section 29(5) provides that a registered person whose registration is cancelled must pay an amount by debit to the electronic credit ledger or electronic cash ledger equivalent to the applicable input tax credit relating to:
- inputs held in stock;
- inputs contained in semi-finished goods held in stock;
- inputs contained in finished goods held in stock; and
- capital goods or plant and machinery,
as on the day immediately preceding the date of cancellation.
The amount is compared with the output tax payable on such goods, and the higher amount is payable, calculated in the prescribed manner.
Capital Goods and Plant and Machinery
For capital goods or plant and machinery, Section 29(5) contains a specific mechanism.
The amount is based on:
- the input tax credit originally taken, reduced by the prescribed percentage points; or
- the tax on the transaction value under Section 15,
whichever is higher.
The detailed calculation is governed by the prescribed rules.
Why Stock Details Matter at the Time of Cancellation
Rule 20 requires the cancellation application to contain details of stock and capital goods held on the date from which cancellation is sought.
This information is important because Section 29(5) creates a payment consequence for eligible ITC relating to stock and capital goods.
Before applying for cancellation, a taxpayer should therefore reconcile:
- physical stock;
- books of account;
- electronic credit ledger;
- purchase records;
- capital goods records; and
- applicable tax calculations.
Final Return After Cancellation
Cancellation of GST registration does not mean that every compliance requirement immediately ends.
Section 45 deals with the final return of a person whose registration has been cancelled.
The prescribed final-return mechanism is generally associated with FORM GSTR-10.
Therefore, after cancellation, the taxpayer should also check the applicable final-return requirement and its due date.
Cancellation and final-return compliance are related but separate requirements.
Can a Cancelled GST Registration Be Revoked?
Yes, in eligible cases.
Where registration has been cancelled by the proper officer on his own motion, the taxpayer may apply for revocation of cancellation under Section 30 and Rule 23, subject to the prescribed conditions.
The current Rule 23 provides for an application in FORM GST REG-21. It generally allows the application within 90 days from the date of service of the cancellation order, with provision for extension by the competent authority for a further period not exceeding 180 days where sufficient cause is shown and the prescribed conditions are satisfied.
Where cancellation occurred because of failure to furnish returns, the pending returns and applicable tax, interest, penalty and late fee requirements must be addressed before revocation can be filed under the applicable rule.
Important Difference Between Cancellation and Revocation
Cancellation and revocation are different actions.
Cancellation means that the GST registration has been cancelled.
Revocation of cancellation means restoring a registration that was cancelled by the proper officer on his own motion, subject to the conditions and procedure under Section 30 and Rule 23.
A taxpayer cannot simply assume that every cancelled registration will automatically be restored.
The taxpayer must follow the prescribed revocation procedure where eligible.
Cancellation vs Suspension of GST Registration
| Basis | Cancellation | Suspension |
|---|---|---|
| Meaning | Registration is cancelled from the applicable effective date | Registration is temporarily suspended |
| Nature | Ends the registration unless restored through the applicable legal mechanism | Temporary restriction during specified proceedings |
| Taxable supply | Cannot be made as a registered person after effective cancellation | Taxable supply cannot be made during suspension |
| Tax invoice | Cannot be issued after cancellation | Cannot be issued during suspension |
| Earlier liabilities | Continue to survive | Continue to apply |
| Main provisions | Section 29 and Rules 20–22 | Section 29 and Rule 21A |
| Restoration mechanism | Revocation under Section 30 and Rule 23, where eligible | Suspension is dealt with through Rule 21A |
Rule 21A specifically provides that a person whose registration is suspended cannot make taxable supplies during the suspension period.
Important GST Forms Related to Section 29
FORM GST REG-16
FORM GST REG-16 is used for an application for cancellation of GST registration under Rule 20.
FORM GST REG-17
FORM GST REG-17 is the show cause notice issued by the proper officer for cancellation proceedings under Rule 22.
FORM GST REG-18
FORM GST REG-18 is used for the taxpayer’s reply to the cancellation show cause notice.
FORM GST REG-19
FORM GST REG-19 is used for the cancellation order where registration is cancelled by the proper officer.
FORM GST REG-20
FORM GST REG-20 is used when cancellation proceedings are dropped because the taxpayer’s explanation or prescribed compliance is found satisfactory.
FORM GST REG-31
FORM GST REG-31 is used for specified intimation relating to differences, anomalies or non-compliances under Rule 21A(2A).
FORM GST REG-21
FORM GST REG-21 is used for an application for revocation of cancellation of registration under Rule 23.
Practical Example of Section 29
Suppose ABC Traders is registered under GST.
The proprietor decides to permanently close the business.
The taxpayer may apply for cancellation because the business has been discontinued.
Before filing the application, ABC Traders should:
- Determine the appropriate cancellation date.
- Review pending GST returns.
- Calculate outstanding tax, interest and other dues.
- Identify inputs and finished goods held in stock.
- Review capital goods.
- Calculate the amount payable under Section 29(5).
- Submit FORM GST REG-16.
- Complete the applicable final-return and other post-cancellation requirements.
Now consider another situation.
XYZ Traders continues its business but fails to furnish the returns for the prescribed continuous period.
If the conditions under Section 29 and Rule 21 are satisfied, the proper officer may initiate cancellation proceedings.
The taxpayer may receive FORM GST REG-17 and be required to respond within seven working days.
If the taxpayer provides a satisfactory explanation, the proceedings may be dropped through FORM GST REG-20. If the registration is liable to cancellation, the proper officer may issue FORM GST REG-19.
What Should a Taxpayer Check Before Cancelling GST Registration?
A taxpayer should not treat cancellation as merely an online formality.
Before submitting the cancellation application, it is useful to review the following:
Pending Returns
Check whether any GST returns are pending and whether there are outstanding filing obligations.
Outstanding Tax
Review unpaid GST, interest, penalty and other dues.
Input Tax Credit
Reconcile the electronic credit ledger with books and purchase records.
Stock
Determine the quantity and value of inputs, semi-finished goods and finished goods held on the relevant date.
Capital Goods
Review capital goods and plant and machinery because Section 29(5) contains a specific mechanism for them.
Cancellation Date
The effective date of cancellation can affect tax and compliance obligations.
Final Return
Check the applicable final-return requirement under Section 45.
Existing Proceedings
Cancellation does not automatically terminate liabilities or proceedings relating to earlier periods.
Key Points to Remember About Section 29
The most important points relating to Section 29 are:
- Section 29 deals with cancellation or suspension of GST registration.
- Cancellation can be initiated by the registered person or the proper officer.
- Legal heirs can apply for cancellation in case of death of the registered person.
- Business discontinuation can be a ground for cancellation.
- Full transfer, amalgamation, demerger or disposal of business can lead to cancellation.
- Change in the constitution of business is covered by Section 29.
- A person no longer liable to registration under Section 22 or Section 24 may seek cancellation.
- A person who voluntarily obtained registration may opt out subject to the applicable provisions.
- The proper officer can cancel registration on specified grounds.
- Non-filing of the prescribed returns can result in cancellation.
- A voluntarily registered person who does not commence business within six months can face cancellation.
- Registration obtained through fraud, wilful misstatement or suppression of facts can be cancelled.
- The taxpayer must be given an opportunity of being heard before cancellation under the relevant ground in Section 29(2).
- Registration may be suspended while cancellation proceedings are pending.
- During suspension, the registered person cannot make taxable supplies in accordance with Rule 21A.
- Cancellation can be made from a retrospective date where the law permits and the proper officer determines such date.
- Cancellation does not remove earlier tax liabilities or other obligations.
- Section 29(5) contains provisions relating to ITC attributable to stock and capital goods.
- Rule 20 provides the procedure for taxpayer-initiated cancellation.
- Rule 21 contains prescribed grounds for cancellation.
- Rule 21A deals with suspension.
- Rule 22 deals with cancellation proceedings initiated by the proper officer.
- Revocation of cancellation is dealt with under Section 30 and Rule 23.
Conclusion
Section 29 of the CGST Act, 2017 provides the legal framework for cancellation or suspension of GST registration. It covers situations where a business is discontinued, transferred, amalgamated or otherwise disposed of, where there is a relevant change in the constitution of the business, and where the taxpayer is no longer liable to remain registered or intends to opt out of voluntary registration under the applicable provision.
The proper officer can also cancel registration where prescribed legal provisions are contravened, applicable returns are not furnished for the prescribed period, a voluntarily registered person does not commence business within six months, or the registration was obtained through fraud, wilful misstatement or suppression of facts. The taxpayer must receive an opportunity of being heard before cancellation under the relevant statutory provision.
Suspension is different from cancellation. Under Rule 21A, registration may be suspended while cancellation proceedings are pending. During suspension, the registered person cannot make taxable supplies or issue tax invoices in the manner specified by the rule.
Another important point is that cancellation does not wipe out previous GST liabilities. Section 29(3) specifically preserves liability for tax, other dues and obligations relating to the period before cancellation. Section 29(5) also deals with the amount payable in relation to input tax credit attributable to stock and capital goods.
For a taxpayer, GST cancellation should therefore be approached as a complete compliance process rather than simply surrendering the GST number. Pending returns, tax dues, stock, input tax credit, capital goods, final-return requirements and any existing proceedings should all be reviewed before and after cancellation.
Frequently Asked Questions About Section 29 of the CGST Act
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