Reasons for Suspension of GST Registration

Introduction to GST Registration Suspension

The GST regulations provide a unified tax system. Eliminating multiple indirect taxes in India, the GST system created a robust framework with its GST Network (GSTN). This online taxation policy streamlined the compliance process.

As per the GST law, registered taxpayers must pay GST taxes accurately. Failing to pay the correct tax liabilities or maintaining transaction records can result in GST penalties and fines. Compliance failure can also result in suspension of GST status.

To help you navigate GST regulations, we will explore GST registration suspension reasons along with tips to avoid them.

Understanding the GST Registration Process

The GST registration process is done completely online through the GST Portal. GST registration is mandatory for suppliers of goods and services subject to GST tax. The registration mandate is also based on the annual turnover of the company.

If your company’s annual turnover isRs. 20 lakh or more and you sell GST goods, you must apply for GST registration. However, GST registration is mandatory for companies with annual turnovers of Rs. 40 lakh or more. Businesses that supply to other states must also register for GST. E-commerce sellers with sales exceeding Rs. 20 lakh also have to register. Businesses operating in more than one state, are required to apply for GST registration separately in each state.

While registering, you can select ‘Composition scheme’ if your annual turnover is less than Rs. 1.5 crore. This will reduce your GST burden. However, you cannot claim an input tax credit under the composition scheme.

GST Registration Suspension Reasons

GST cancelation can be initiated by you or by the department. When the department initiates the cancelation of GST registration, it is often for a valid reason. GST registration can also be canceled by legal heirs of deceased taxpayers. When GST registration cancelation is initiated, the GST registration will be suspended until a decision is made. The following reasons outline why your GST registration can be suspended:

• The GST registration will be suspended if you have applied for the cancelation of GST. The suspension will be applied immediately after you have applied, or from whatever date of cancelation has been applied for, whichever is later.

• When officers believe that the GST registration can be canceled based on Section 29, they may suspend the GST registration.

• If details furnished in Form GSTR 1 of inward supplies do not match with the details of outward supplies furnished by the suppliers in their FORM GSTR 1, the account may be suspended. The taxpayer will be notified via Form GST REG 31 through the GST portal or via email, highlighting the anomalies and requesting action to be taken within 30 days of receiving the form.

• When the organizational structure changes, the department may suspend the GST registration.

• The department can cancel the registration when the taxpayer voluntarily gives up the registration.

• GST registration will be cancelled if the taxpayer is found to be non-compliant such as when they do not supply services from the GST-registered address, issue goods without an invoice, or violate the GST Act in some other way.

• It is possible to register for GST before the launch of the business. In that case, if the business is not launched within 6 months of registering for GST, the authorities may suspend or cancel the registration.

• GST registration may be canceled if businesses registered under the composition scheme have not filed returns for 3 consecutive tax periods.

• GST registration for businesses not covered by the composite scheme may be canceled unless their income tax returns have been filed for six months.

• Authorities may cancel GST registration at any time if they suspect fraud, suppression of facts, or deceptive statements.

Also Read: What Are the Reasons for Suspension of GST Registration and How to Resolve it

Consequences of Suspended GST Registration

When the registered taxpayer is notified that their GST registration is suspended, they cannot make any taxable supply. They cannot charge GST tax to their buyers nor furnish any return under Section 39. During the suspension period, no tax refund will be provided to them.

Once they clarify the anomalies and submit the necessary proof of transactions, the officer can revoke the suspension. This is possible after completing the necessary proceedings.

In case the supplier has accepted any order before the suspension and has to deliver the order during the suspension period, they must issue the revised tax invoice within one month of suspension. The details of revised invoices must be furnished in the first return submitted after revoking the suspension. Some of the key points to remember regarding the consequences of GST suspension or cancelation are:

• You cannot pay tax returns or claim GST ITC
• It impacts your business reputation 
• You will have more difficulties in registering for GST again
• It harms business goodwill and other businesses may hesitate to re-establish relationships with you
• This can result in more GST fines and charges due to non-compliance

Ways to Avoid Suspension of GST Registration

To ensure that your business goes smoothly, you must adhere to the GST regulations. Accurate record-keeping is an integral part of GST compliance. Always generate GST tax invoices and pay GST taxes on time. Some of the ways you can avoid GST registration suspension are:

• File income tax returns promptly
• Use the right GST forms for filing your returns and provide accurate information
• Pay GST tax liabilities on time
• Maintain a record of transactions for audit checks
• Respond to notifications and warnings from the authorities
• Never violate GST laws or intentionally misuse GST relief

Understanding the Process for Reinstating Suspended GST Registration

When the authorities ask for clarifications of anomalies in income tax return statements, you must provide the right documents. For suspended accounts, the proper officer will review your response to Form GST REG 31 and determine the right course of action.

If your GST registration is canceled, it is possible to reinstate it. However, you don’t need to re-apply for GST. You can request revocation of cancellation of registration in the following ways:

• Submit Form GST REG 21 to the proper office within 90 days of the order of cancelation. You can submit this form directly to the GST office or the Facilitation Centre as notified by the commissioner.

• If registration is canceled because returns are not filed, you can apply for revocation only after furnishing pending returns and paying due tax along with penalties and fines.

• After you submit proper reasons for the revocation request, the officer may revoke cancelation through Form GST REG 22 within 30 days.

• If the proper officer is not satisfied, they will issue Form GST REG 23 to ask for more details on why your GST registration must not be canceled. Within 7 working days, you must submit a response through Form GST REG 24 with the necessary documentation and transaction proofs.

• Within 30 days of receiving GST REG 24 from the taxpayer, the Proper Officer must respond to the clarification. If they are satisfied, they may revoke the cancelation. Otherwise, they will issue a GST cancelation order and communicate the same to the taxpayer through Form GST REG 05.

• If cancelation is revoked, you must submit tax returns for the period from the cancelation order till the date of the revocation order within 30 days.

• Even if the cancelation is not revoked, you must submit returns for the period from the cancelation order till the date of cancelation of the revocation application.

• Cancelation of GST registration does not free you from tax liabilities. You must pay the pending tax, including fines, penalties, and late fees if any.

Conclusion

Repeated non-compliance with GST regulations will almost always result in suspension or cancelation of GST registration. The opportunity to respond to a suspension or cancelation order is available for 30 days from the date of issuing the cancelation order. If you fail to submit clarification and response to the order, the suspension or cancelation order will be final. You can request revocation of GST cancelation with Form GST REG 21. Ensure that you respond within the required time limit and provide reasons and clarifications promptly.

Also Read: GST: Everything You Need To Know

FAQs

1. Who can suspend a GST registration?

Tax authorities who find taxpayers non-compliant with GST regulations can suspend GST registration. Wrong details, improper filing of tax returns, non-payment of GST tax, and not filing tax returns are some of the reasons why authorities may suspend or cancel your GST registration.

2. Will my GST registration get suspended for non-compliance immediately?

Generally, if there are errors in income tax returns, you will have the option to issue corrections in your next return submission. However, if the authorities find anomalies in the inward supplies and outward supplies GST forms, they may suspend your account immediately. Non-compliance results in GST suspension.

3. What to do when my GST registration is suspended due to errors in GST form details?

In case of errors, you will be notified that your GST registration is suspended and the authorities will ask you to furnish the correct details. Update the correct details and resolve the anomalies to reinstate your GST registration.

4. What happens if I don’t submit a response to the GST suspension order?

Failure to respond to the GST suspension order will result in the cancelation of GST.

5. What can I do to reinstate my GST registration?

Submit Form GST REG 21 through the GST portal. Furnish the necessary details and invoices to reinstate your GST registration. The authorities will revoke the cancelation only if they are satisfied with your response. 

6. What is the difference between cancelation and suspension of GST registration?

When the tax authorities detect anomalies in your GST forms, they might suspend your account. However, repeated non-compliance or violation of GST laws can result in the cancelation of GST registration. GST registration suspension can be invoked by tax authorities. Your account will be automatically reinstated once you submit the necessary documents. Reinstating registration cancellation is more tedious, but it can be done through GST forms using the online portal. 

7. How will I know if my GST is suspended?

When authorities suspend your GST registration, they will notify you electronically through email or their online portal. You will be asked to clarify the anomalies found in your GST forms. Updating the right information will persuade the proper officer to revoke the suspension. 

8. Can I reinstate GST registration cancellation?

It is possible to reinstate GST registration cancellation with GST Form REG 21. Ensure that you provide accurate and truthful information in the form. 

9. Can I continue running my business if my GST registration is suspended?

When your GST registration is suspended, you are not required to close down the business. However, you cannot collect GST from your customers. Also, you cannot claim input tax credit during the suspension period. While you can fulfill already accepted orders, you are not allowed to buy or sell GST goods or services. 

10. What if I disagree with GST registration suspension?

You will have the opportunity to clarify and provide transaction proof regarding the anomalies. However, if you still feel that you don’t agree with the GST registration suspension, you can contact the authorities and raise your concern.

Niharika Kapoor Content Writer

Niharika is a Freelance Content Writer and Translator with a Master of Arts in Literature. She has 5+ years of working in the same and has worked in different industries.

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