Reckless cancellation of GST Number Retrospectively: Ease or Cease of Doing Business

GST Number Application or cancellation has become the current favorite topic of both the GST Department, Taxpayers, and Tax Professionals. In today’s time getting GST Number is like winning a war. Similarly, it has been seen that the GST Department cancels GST Numbers for unfair reasons and that too retrospectively. Often there is no resort with taxpayers, but to seek Judicial Help from High Courts.

Non-Filing of GST Return

Often it is seen that the GST Number is cancelled retrospectively for Non-Filing of GST Returns. Now there are numerous of Case laws where courts have said this thing.

The Delhi High Court in the matter of SHREE BALAJI TRANSPORT Vs. THE COMMISSIONER OF CENTRAL TAX APPEALS has ruled out that Non-Filing of GST Returns is not an objective criterion to cancel GST retrospectively. The Court said:

“In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.”

Also Refer Non-Filing of GST Returns due to Death of Taxpayer: HC quashes retrospective GST Cancellation Order

No Proper Opportunity of Being heard is Given:

The High Court of Allahabad in the matter of M/S Manikya Engineers And Consultants Pvt. Ltd. Vs. State Of U.P. Thru. Secy. Revenue has quashed the GST Cancellation Order passed without a hearing. Many such orders can be found for others as well.

No Clear Reason for cancellation given in GST Notice

Many times it is seen that GST notice is issued  mechanically and without providing allegations clearly. High Courts straight away quash these vague notices.

The Delhi High Court in the matter of M/S SK ENTERPRISES Vs. PRINCIPAL COMMISSIONER OF GOODS AND SERVICES TAX has ruled out that GST Cancellation Notice must clearly set out fraudulent allegations.

Reversal of ITC of Customers:

The Delhi High court in matter of R. TRADING CO. PROPRIETORSHIP Vs. COMMISSIONER OF DELHI GST has asked the GST Department to use the power of GST Department to cancel the GST Number retrospectively judicially as same leads to Reversal of Input Tax Credit (ITC) of customers of the Taxpayers.

It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such a period. Although we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

However many High Courts have also said that ITC cannot be reversed solely on the ground that GST registration of supplier was canceled with retrospective effect.

Not all can go to Court:

Yes, it is seen that often taxpayers get relief at the High Court Level, but it is also true that litigation has its own cost, and not everyone can afford to go to court.