On 23rd April 2019, Central government has issued an order called “Removal of Difficulties Order – CT-ROD-ORD-05/2019 to give one time opportunity to all taxpayers whose GST number was cancelled by department on account of sou moto action.
In this order, it is provided that whose GST number was cancelled by GST department on his own motion and the order for which was served on or before 31.03.2019, he can apply for revocation of such cancellation by 22nd July 2019. Window for application for revocation will be closed post 22nd July 2019. In this article, we will go through the provisions of this order along with consequences of not availing this opportunity.
As per Section 29(2), proper officer may cancel the registration of a person where: –
(a) a registered person has contravened such provisions of the Act or the rules made there-under as may be prescribed; or
(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or
(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:
In CGST Rules 2017, following further grounds are provided where GST number may be cancelled in reference to clause (a) as discussed above. As per Rule 21, 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 in violation of the provisions of this Act, or the rules made there under; or
(c) violates the provisions of section 171 of the Act or the rules made there under.
As the GST laws empower officers to send show cause notice through electronic means, officers had issued notices to tax payers through e-mails. Due to new systems and inability of tax payers to adopt new systems, many of tax payers did not respond to such notices within the time prescribed in such notices. Non-respond to show cause notices in due time lead to issuance of cancellation orders by officers.
Thus, as a relief measure, one time opportunity has been given to all such persons whose GST number was cancelled and the order for cancellation was passed on or before 31.03.2019.
Steps to be taken before filing of application for revocation of cancellation in case cancellation order passed due to non-filing of GST Returns: –
First proviso to sub-rule (1) of rule 23 of the CGST Rules 2017 provides that if the registration has been cancelled on account of failure of the registered person to furnish returns, no application for revocation of cancellation of registration shall be filed, unless such returns are furnished and any amount (including interest, late fee, etc.) in terms of such returns is paid.
Thus, where the registration has been cancelled with effect from the date of order of cancellation of registration, all returns due till the date of such cancellation are required to be furnished before the application for revocation can be filed.
Further, in such cases, in terms of the second proviso to sub-rule (1) of rule 23 of the said Rules, all returns required to be furnished in respect of the period from the date of order of cancellation till the date of order of revocation of cancellation of registration have to be furnished within a period of thirty days from the date of the order of revocation.
Where the registration has been cancelled with retrospective effect, the common portal does not allow furnishing of returns after the effective date of cancellation. In such cases it was not possible to file the application for revocation of cancellation of registration.
Therefore, a third proviso was added to sub-rule (1) of rule 23 of the said Rules enabling filing of application for revocation of cancellation of registration, subject to the condition that all returns relating to the period from the effective date of cancellation of registration till the date of order of revocation of cancellation of registration shall be filed within a period of thirty days from the date of order of such revocation of cancellation of registration.
Thus, keep in mind to pay all taxes, interest and late fee before moving application for revocation of GST number. Further, a sufficient reserve should be there to pay taxes and to complete all pending returns within 30 days of order for revocation of cancellation.
Consequences of non filing of application for revocation of cancellation
Sometimes, few of smart persons thought to apply for fresh GST number without paying taxes and filing returns in previous GST registrations. In this regard, let us remind you that government is already on high alert to issue fresh GST number to all these smart persons.
A Circular was issued on 28th March 2019 by CBIC saying,
It was observed that a large number of registrations have been cancelled by the proper officer under the provisions of sub-section (2) of section 29 of the Central Goods and Services Act, 2017 (hereinafter referred to as “CGST Act”) read with rule 21 of the Central Goods and Services Rules, 2017 (hereinafter referred to as “CGST Rules”) on account of non-compliance of the said statutory provisions.
In this regard, instances have come to notice that such persons, who continue to carry on business and therefore are required to have registration under GST, are not applying for revocation of cancellation of registration as specified in section 30 of the CGST Act read with rule 23 of the CGST Rules. Instead, such persons are applying for fresh registration. Such new applications might have been made as such person may not have furnished requisite returns and not paid tax for the tax periods covered under the old/cancelled registration. Further, such persons would be required to pay all liabilities due from them for the relevant period in case they apply for revocation of cancellation of registration. Hence, to avoid payment of the tax liabilities, such persons may be using the route of applying for fresh registration.
It is pertinent to mention that as per the provisions contained in proviso to sub-section (2) of section 25 of the CGST Act, a person may take separate registration on same PAN in the same State.
To deal with such situations, CBIC has issued instructions to officers as given below:-
It is hereby instructed that the proper officer may exercise due caution while processing the application for registration submitted by the taxpayers, where the tax payer is seeking another registration within the State although he has an existing registration within the said State or his earlier registration has been cancelled.
It is clarified that not applying for revocation of cancellation of registration along with the continuance of the conditions specified in clauses (b) and (c) of sub-section (2) of section 29 of the CGST Act shall be deemed to be a “deficiency” within the meaning of sub-rule (2) of rule 9 of the CGST Rules.
The proper officer may compare the information pertaining to earlier registrations with the information contained in the present application, the grounds on which the earlier registration(s) were cancelled and the current status of the statutory violations for which the earlier registration(s) were cancelled. The data may be verified on common portal by fetching the details of registration taken on the PAN mentioned in the new application vis-a-vis cancellation of registration obtained on same PAN.
The information regarding the status of other registrations granted on the same PAN is displayed on the common portal to both the applicant and the proper officer.
Further, if required, information submitted by applicant in S. No. 21 of FORM GST REG-01 regarding details of proprietor, all partner/Karta/Managing Directors and whole time Director/Members of Managing Committee of Associations/Board of Trustees etc. may be analysed vis-à-vis any cancelled registration having same details.
While considering the application for registration, the proper officer shall ascertain if the earlier registration was cancelled on account of violation of the provisions of clauses (b) and (c) of sub-section (2) of section 29 of the CGST Act and whether the applicant has applied for revocation of cancellation of registration.
If proper officer finds that application for revocation of cancellation of registration has not been filed and the conditions specified in clauses (b) and (c) of sub-section (2) of section 29 of the CGST Act are still continuing, then, the same may be considered as a ground for rejection of application for registration in terms of sub-rule (2) read with sub-rule (4) of rule 9 of CGST Rules.
Therefore, it is advised that where the applicant fails to furnish sufficient convincing justification or the proper officer is not satisfied with the clarification, information or documents furnished, then, his application for fresh registration may be considered for rejection.
Other than this, penalties leviable under section 122 of CGST Act 2017 would be imposed…..