GST Liability After Suo Moto Cancellation of Registration

When a business’s GST registration is canceled suo moto (on its own motion) by the tax authorities, a common question arises—is the business still liable to pay GST on turnover after cancellation? The answer depends on whether the business continues operations and its taxable supplies. Let’s explore the legal provisions, tax obligations, and compliance steps required in such cases.

1. What Happens When GST is Canceled Suo Moto?

Suo moto cancellation of GST registration usually occurs due to non-compliance, such as:

• Non-filing of returns for an extended period
• Failure to respond to show-cause notices
• Any other violation under the CGST Act, 2017

Once the GST is canceled, the taxpayer loses the right to collect GST from customers and claim Input Tax Credit (ITC). However, that does not mean the liability to pay GST on taxable supplies ceases immediately.

2. GST Liability on Turnover After Cancellation

a) If You Continue Business After GST Cancellation

• Even after cancellation, a taxpayer is liable to pay GST on taxable supplies made before the cancellation is finalized.
• As per Section 29(3) of the CGST Act, 2017, if any taxable turnover is generated post-cancellation, the business is still liable to pay GST on such sales.
• This liability must be settled through the final return (GSTR-10).

👉 Example: If your GST registration was canceled on March 15, 2024, but you continued selling goods/services in April 2024, those sales would still attract GST liability, even though your GSTIN is inactive.

b) If You Stop Business Operations After Cancellation

• If the business stops making taxable supplies, there is no GST liability on future transactions.
• However, the taxpayer must file GSTR-10 to officially close the GST obligations.
• Any pending tax dues, ITC reversals, or liabilities before cancellation must be cleared.

👉 Example: If a business stops operations completely on the cancellation date, it only needs to settle pre-cancellation tax liabilities but owes nothing on future sales.

3. What If You Continue Sales Without GST After Cancellation?

Selling goods or services without GST after cancellation can have serious legal consequences:
✅ Penalties & Fines: Selling without a valid GST registration can lead to penalties under Section 122 of the CGST Act, 2017.
✅ Demand & Recovery Proceedings: The tax authorities may issue a demand notice and recover unpaid GST with interest.
✅ Legal Action for Evasion: If a business collects GST without registration or fails to register despite exceeding the threshold, prosecution may follow.

4. How to Settle GST Liability After Cancellation?

a) File GSTR-10 (Final Return)

• A taxpayer whose GST is canceled must file GSTR-10 within three months of cancellation.
• This return ensures all pending GST liabilities are settled, including:
  • Taxes on closing stock
  • Reversal of Input Tax Credit (ITC)
  • Any unpaid GST on previous sales

b) Apply for Revocation (If Eligible)

• If the cancellation was due to non-filing of returns, but the business wants to continue, a taxpayer can apply for revocation under Section 30 of the CGST Act within 30 days of cancellation.
• If the revocation deadline has passed, filing an appeal (GST APL-01) may help restore registration.

c) Apply for Fresh GST Registration (If Required)

• If the business turnover exceeds the exemption limit (₹40 lakh for goods, ₹20 lakh for services in most states), a new GST registration must be obtained.
• If a fresh registration is not allowed by the proper officer, the taxpayer can appeal to the GST Jurisdictional Commissioner.

5. Can You Claim ITC After Cancellation?

• Once GST is canceled, the taxpayer cannot claim Input Tax Credit (ITC) on purchases made after cancellation.
• If the cancellation is revoked, ITC may be restored, but purchases made during the inactive GST period will not be eligible for credit.

6. What Should You Do Next?

📌 If turnover exceeds the exemption limit → Apply for a fresh GST registration.
📌 If turnover is below the threshold → Continue as an unregistered business (without charging GST).
📌 If revocation is possible → File an application to restore the old GSTIN.
📌 If denied new registration → File an appeal or approach the GST Commissioner.

Conclusion

Even after suo moto cancellation of GST registration, businesses may still be liable to pay GST on taxable supplies made post-cancellation. To avoid penalties and legal action, it is crucial to file pending returns, clear tax dues, and either revoke the registration or obtain a new one if required. Ensuring compliance will prevent unnecessary liabilities and protect the business from regulatory action.

Would you like assistance in drafting a request for revocation or a fresh GST registration application? 🚀