Section 29 of CGST Act - Cancellation of Registration

Section 29 of the Central Goods and Services Tax Act, 2017 governs cancellation of GST registration by the proper officer, either on an application by the registered person or legal heirs, or on the officer's own motion in specified cases. It also preserves pre-cancellation tax liabilities and provides for adjustment or payment relating to input tax credit on stock and capital goods.

What does cancellation of GST registration mean?

Cancellation under Section 29 ends the GST registration from the effective date stated in the cancellation order. Cancellation does not erase liabilities or statutory obligations relating to the period before the effective date. Depending on the facts, the proper officer may also make cancellation effective from a retrospective date where Section 29 permits it.

Section 29(1): When registration may be cancelled

The proper officer may cancel registration on the officer's own motion, on an application by the registered person, or, where the registered person has died, on an application by the legal heirs. The statutory circumstances include:

1. discontinuance of business, full transfer of business for any reason including death of the proprietor, amalgamation, demerger or other disposal;
2. a change in the constitution of the business; or
3. the taxable person is no longer liable to registration under Section 22 or Section 24, or intends to opt out of a registration voluntarily obtained under Section 25(3).

During the pendency of cancellation proceedings initiated by the registered person, the registration may be suspended in the manner prescribed by the CGST Rules.

Section 29(2): Cancellation by the proper officer

The proper officer may cancel registration from a date considered appropriate, including a retrospective date, where one of the statutory grounds exists. These grounds include:

1. contravention of prescribed provisions of the CGST Act or CGST Rules;
2. in the case of a person paying tax under Section 10, failure to furnish the return for a financial year beyond three months from its due date;
3. in the case of other registered persons covered by clause (c), failure to furnish returns for the continuous tax period prescribed under the Rules;
4. failure by a person who obtained voluntary registration under Section 25(3) to commence business within six months from registration; or
5. registration obtained by fraud, wilful misstatement or suppression of facts.

Section 29(3) and 29(4): Effect of cancellation

Cancellation does not affect liability to pay tax or other dues, or to discharge obligations under the CGST Act or Rules, for any period before the effective date of cancellation. This applies whether the liability is determined before or after cancellation.

Cancellation under the corresponding State GST Act or Union Territory GST Act is deemed to be cancellation under the CGST Act as well.

Section 29(5) and 29(6): ITC, stock and capital goods

Where registration is cancelled, Section 29(5) requires payment or debit, as applicable, based on the input tax credit attributable to inputs held in stock, inputs contained in semi-finished or finished goods, and capital goods or plant and machinery immediately before cancellation, or the output tax payable on such goods, whichever is higher, calculated in the prescribed manner.

For capital goods or plant and machinery, the comparison is made after applying the prescribed reduction to the input tax credit, or by reference to tax on transaction value under Section 15, as applicable. The detailed calculation is governed by the relevant CGST Rules.

Relevant CGST Rules for cancellation

Section 29 should be read with the registration provisions in the CGST Rules, particularly the rules dealing with application for cancellation, prescribed grounds for cancellation, suspension of registration and the procedure followed by the proper officer. In practice, the taxpayer should verify the current form and portal procedure before filing or replying to cancellation proceedings.

• Rule 20: application for cancellation of registration.
• Rule 21: prescribed cases in which registration is liable to cancellation.
• Rule 21A: suspension of registration in specified circumstances.
• Rule 22: procedure for cancellation, including notice, reply and order.
• Rule 23: revocation procedure where cancellation was ordered by the proper officer on the officer's own motion.

Revocation of cancellation and final return

If registration has been cancelled by the proper officer on the officer's own motion, Section 30 of the CGST Act provides the statutory route for revocation, subject to the prescribed conditions, procedure and time limits.

Where applicable, Section 45 requires a final return after cancellation. Taxpayers should also clear applicable return, tax, interest, penalty and late-fee requirements where these are relevant to revocation or closure of the registration.

Practical points before seeking cancellation

• Confirm whether registration is still compulsory under Sections 22 or 24.
• File pending returns and reconcile tax liabilities before applying, where applicable.
• Review stock, semi-finished goods, finished goods and capital goods for the Section 29(5) calculation.
• Keep evidence supporting discontinuance, transfer, change in constitution or other stated reason for cancellation.
• Check the GST portal and current CBIC rules/notifications for the applicable form and procedure.

This page is a general legal-information article on Section 29 of the CGST Act. Statutory provisions, rules, notifications and portal procedures should be checked in their current form for a specific case.