Suspension of registration is incorporated under Section 29 of the CGST Act

To facilitate and making things easier for the taxpayer, the Government is continuously amending/inserting various provisions of the Goods and Service Tax. Thus the government has developed a new concept of the suspension of GST registration.

With the initiation of the suspension of GST registration, taxpayers who have demanded the cancellation of GST registration would be saved up from the requirement of complying with the GST return filing provision during the suspension period, thereby decreasing the compliance cost of the taxpayer.

Suspension of registration is incorporated under Section 29 of the CGST Act, 2017 and its procedure has been provided under Rule 21A of the CGST Rules 2017. Section 29 has been amended by CGST (Amendment) Act, 2018 (no. 31 of 2018) dated 29.08.2018 to provide suspension” of GST Registration w.e.f. 01.02.2019 and Rule 21A was incorporated by Notification 03/2019- Central Tax dated 29.01.2019 w.e.f 01.02.2019.

Table of Content

Provisions for Suspension of GST Registration

As per Section 29-

  • The title of the section was revised from ‘Cancellation of Registration’ to ‘Cancellation or Suspension of Registration.
  • A new proviso was entered to section 29 (1) as under;‘Provided that during the pendency of the proceedings relating to the cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed’The above proviso declares that the GST registration during the period between the date of application of cancellation of GST registration and the date of actual cancellation of GST registration would be excluded or you can say suspended.
  • One more proviso was inserted to Section 29(2)(e) which deals with the suspension of GST registration by the proper officer during the pendency of the proceedings relating to the cancellation of GST registration, in the manner prescribed.Rule 21A applies to the registered person who has appealed for the cancellation of its registration.

In a case where the cancellation of registration proceedings are pending, the registration shall be deemed to have been suspended from later of the following dates –

  • Date of submission of the application; or
  • Date from which the cancellation is asked.

Suspension of registration by Proper Officer

The proper officer has been offered the right to; cancel the GST registration of a person if he has reason to believe that the registration is liable to be cancelled.

The complete procedure laid down under rule 22 of the CGST Rules, 2017 has to be followed before cancelling such registration by a proper officer.

Thus, where the procedure for cancellation of GST registration is being initiated by the proper officer, he can suspend the registration of such a person.

 Rule 21A has been amended vide Notification 94/2020-Central Tax dated 22.12.2020, and Departmental Officers are given more powers concerning cancellation and suspension of GST Registration and to take action upon serious misreporting in GSTR 1 and 2B and GSTR 3B.

The amendments made vide the said notification are given as:

A new sub-rule 2A has been introduced which states that if a proper officer finds any flaws:

  •  While comparing details of outward supplies furnished under Form GSTR-1 and Form GSTR 3B
  •  On analyzing details of inward supplies reflecting in the Form GSTR-2B with the Form GSTR-3B
  • While any other analysis

Form GST REG-31 can be issued by him for implying such miscalculations to the taxpayer on the portal or communicating through the registered email-id. It will also be mentioned that if a proper explanation is not given on these discrepancies, the registration may get cancelled.

The registration can also be suspended by him as per Rule 21A(2A) with effect from the date of this letter to the taxpayer. Moreover, the proper officer can lift the suspension if he receives a satisfactory reply from the taxpayer

Since REG-31 has not been activated on the GST portal, CBIC has given a standard operating procedure (SOP) vide circular No 145/01/2021-GST dated 11.01.2021 (Standard Operating Procedure (SOP) for implementation of the provision of suspension of registrations under sub-rule (2A) of rule 21A of CGST Rules, 2017 – regarding) which should be read with Rule 21A(2A).

As per the above Circular, a GST registration can be suspended by the Jurisdiction officer if he finds ‘Significant Anomalies’ between the values of

  • Compare GSTR 3B Turnover with GSTR 1 Turnover Values as declared by the assessee
  • GSTR3B Input tax credit value of the assessee vs GSTR1 Value filed by his suppliers

The period of suspension will be 30 days and the Assessee can present his reply with clarifications/explanations to the Jurisdictional officer within 30 days from the date of the notice.

If the officer is satisfied with the Assessee’s reply he can withdraw the suspension of GST registration.

If the reply is not satisfactory to the Jurisdiction officer, or the Assessee has not presented his reply to the Jurisdiction officer within the designated time limit, then the Jurisdiction officer can continue with the Cancellation of the GST Registration.

The notice to the Assessee in FORM GST REGN – 31 will be System generated and will be delivered to the Assessee.

 Though, till the time the facility of generating FORM GST REGN – 31 through Online is enabled, as an alternative arrangement, the Jurisdiction officer can publish a Notice in FORM GST REG – 17 through the GST portal. This notice can be seen from the “View/Notice and Order” tab after logging in.

The reply against the notice can be filed by the assessee online through FORM GST REG – 18 in the same portal within the stipulated time limit of 30 days.

The effective date of GST Registration Suspension:

  • When a taxpayer applies for the cancellation of registration: The date of Suspension will be the date on which the Cancellation application was filed.
  • Cancellation by Tax official on their own: Date of Suspension will be the date on which intimation for suspension of registration or notice Cancellation of registration (Form GST REG 31/REG-17) is issued.

What are the effect/consequences of the suspension of GST registration?

On suspension of GST registration –

  • The person is unable to make any taxable supply after suspension of GST registration;
  • She/he is not required to furnish any returns as required under section 39 of the Central Goods and Service Tax Act, 2017; and
  • The person will also not be granted any refund under Section 54, as the registration is suspended.

It seems that the only benefit of the suspension of GST registration, from the viewpoint of the registered person, is that he would be freed up from the return compliance under GST. 

Nevertheless, the rejection of refunds till the cancellation of suspension can prove to be disadvantageous to the taxpayer.

Revocation of suspension of GST registration

  • As the process of cancellation of GST registration is being performed by the proper officer, the suspension of GST registration shall be withdrawn.
  • The revocation of suspension of GST registration shall be valid 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 of the cancellation, if he thinks fit.

After the revocation of suspension of GST Registration

  • In case the suspension of registration has reversed the provisions in Section 31(3)(a) and Section 40 in respect of the supplies that are made during the period of suspension and the procedure described there shall apply.
  • According to Section 31(3)(a), a registered person may, within one month from the date of cancellation of suspension, issue an updated invoice against the invoice previously issued during the period starting with the effective date of registration till the date when the suspension is revoked.
  • As per Sec 40, the registered person, who has made outward supplies in the period between suspension of registration and revocation of suspension, shall report the same in the first return provided by him after the revocation of suspension.

Conclusion:

The terms directing the suspension of registration, particularly the recent amendments are intended to provide immediate support to the Government against any irregularity or contravention of GST laws to check that there is no misapplication of the online system and the defaulters are prevented from further violation. 

Although the rules do provide some assistance to the genuine taxpayer who has applied for cancellation of registration, the same is inclined towards the department as it presents a wide range of powers to the department to initiate cancellation proceedings and to suspend the registration in between.

 While the suspension is believed to be a positive change, the elimination of the requirement of a personal hearing before the suspension of the registration shifts the balance of justice against the interest of the taxpayer.

However, a reasonable opportunity of being heard should be given to the registered person and then the appropriate procedure of cancellation should be followed.

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