SUSPENSION OF GST REGISTRATION

[Mr. M. GOVINDARAJAN]

Rule 21A deals with the procedure for suspension of GST registration.  Rule 21A was inserted vide Notification No. 03/2019-Central Tax, dated 29.01.2019, with effect from 01.02.2019. 

Cancellation of registration

A registered person applies for cancellation of registration under Rule 20.  Rule 20 provides that a registered person, other than a person to whom a registration has been granted under rule 12 or a person to whom a Unique Identity Number has been granted under rule 17, seeking cancellation of his registration under section 29(1)  shall electronically submit an application in Form GST REG-16, including therein the details of inputs held in stock or inputs contained in semi-finished or finished goods held in stock and of capital goods held in stock on the date from which the cancellation of registration is sought, liability thereon, the details of the payment, if any, made against such liability and may furnish, along with the application, relevant documents in support thereof, at the common portal within a period of thirty days of the occurrence of the event warranting the cancellation, either directly or through a Facilitation Centre notified by the Commissioner.

Rule 21A(1)  provides that if a registered person applies for cancellation of registration under Rule 20,  the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

Rule 21A (2) provides that where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may after affording the said person a reasonable opportunity of being heard suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.

The Central Government, vide Notification No. 92/2020-Central Tax, dated 22.12.2020 gave powers to the proper officer to suspend the registration without affording the registered person a reasonable opportunity of being heard.  This power is against the principles of Natural Justice.  The law shall not explicitly dispense with the principles of Natural Justice.

Anomalies in returns

Anomalies in returns will also lead to suspension of GST registration.  Notification No. 94/2020-Central Tax, dated 22.12.2020 inserted new sub rule 2A to Rule 21A.  According to this sub rule where a comparison of the returns furnished by a registered person with the details of outward supplies furnished in Form GSTR-1 or the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their Form GSTR-1,  or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made there under, leading to cancellation of registration of the said person, his registration shall be suspended.  The said registered person shall be intimated in Form GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.

Form GST REG – 31

This form has been inserted vide Notification No. 94/2020-Central Tax, dated 22.12.2020.  The text of the said form is reproduced below-

 

FORM GST REG – 31

[See rule 21A]

Date:     .   .2021

Reference No.

To

GSTIN

Name:

Address:

Intimation for suspension and notice for cancellation of registration

In a comparison of the following, namely,

(i) returns furnished by you under section 39 of the Central Goods and Services Tax Act, 2017;

(ii) outwards supplies details furnished by you in Form GSTR-1;

(iii) auto-generated details of your inwards supplies

for the period __________ to _________;

(iv) ………………….. (specify)

and other available information, the following discrepancies/ anomalies have been revealed:

• Observation 1
• Observation 2
• Observation 3

(details to be filled based on the criteria relevant for the taxpayer).

2. These discrepancies/anomalies prima facie indicate contravention of the provisions of the Central Goods and Services Tax Act, 2017 and the rules made there under, such that if not explained  satisfactorily, shall make your registration liable to be cancelled.

3. Considering that the above discrepancies/anomalies are grave and pose a serious threat to interest of revenue, as an immediate measure, your registration stands suspended, with effect from the date of this communication, in terms of sub-rule (2A) of rule 21 A.

4. You are requested to submit a reply to the jurisdictional tax officer within ²[thirty days] from the receipt of this notice, providing explanation to the above stated discrepancy/ anomaly. Any possible misuse of your credentials on GST common portal, by any person, in any manner, may also be specifically brought to the notice of jurisdictional officer.

5. The suspension of registration shall be lifted on satisfaction of the jurisdictional officer with the reply along with documents furnished by you, and any further verification as jurisdictional officer considers necessary.

6. You may please note that your registration may be cancelled in case you fail to furnish a reply within the prescribed period or do not furnish a satisfactory reply.

Name:

Designation:

This notice will not contain the signature of the proper officer since it is a system generated notice.

Effect of suspension

The following are the effects by the suspension of GST registration-

• The registered person shall not make any taxable supply during the period of suspension i.e. the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension.
• The registered person shall not be required to furnish any return under section 39.
• The registered person shall not be granted any refund under section 54, during the period of suspension of his registration.

Order of proper officer

The registered person shall give reply to the show cause notice issued vide Form GST REG – 31 within the time stipulated in the notice.  Within a period of thirty days from the date of the reply to the show cause notice the proper officer may cancel the registration, with effect from a date to be determined by him.  The proper officer may notify the taxable person about the cancellation of registration and direct him to pay arrears of any tax, interest or penalty including the amount liable to be paid.

 Where the reply furnished by the concerned person, in response to the notice issued is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in Form GST REG –20.

Revocation of suspension

The suspension of registration shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22.  Such revocation shall be effective from the date on which the suspension had come into effect.  The suspension may be revoked by the proper officer, anytime during the pendency of the proceedings for cancellation, if he deems fit.

After revocation of suspension

If the suspension of registration is revoked the provisions in section 31(3)(a)  and section 40  in respect of the supplies made during the period of suspension and the procedure specified therein shall apply.

According to section 31(3)(a) a registered person may, within one month from the date of revocation of suspension issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of revocation of suspension.

According to section 40 the registered person, who has made outward supplies in the period between the dates on the registration is suspended to till the date on which suspension has been revoked, shall declare the same in the first return furnished by him after revocation of suspension.