Section 29 of CGST Act: GST Registration Cancellation and Suspension Explained

Section 29 of the CGST Act, 2017 outlines the provisions for cancellation or suspension of GST registration by the proper officer, either on their own motion or upon application by the registered person or legal heirs. Registration may be canceled due to business discontinuation, structural changes, non-compliance with filing requirements, or fraudulent registration. The section also details payment obligations post-cancellation, including reversal of input tax credit.

Importantly, cancellation does not absolve past tax liabilities, and registration under SGST/UTGST is deemed canceled upon CGST cancellation. AUBSP.com emphasizes the importance of compliance to avoid penalties and ensure smooth business transitions.

GST Section 29: Cancellation or Suspension of Registration

Understanding the nuances of the Goods and Services Tax (GST) is essential for every taxpayer, especially those operating businesses across India. One such crucial provision is Section 29 of the CGST Act, 2017, which deals with the cancellation or suspension of GST registration. Whether you’re a startup or an established business entity, knowing when and how your GST registration may be canceled or suspended can help you avoid legal and financial complications.

In this article, we will walk you through the complete provisions under Section 29, covering the rules, circumstances, effects, and procedural insights—all in a professionally structured manner to enhance your understanding.

Overview of Section 29 of the CGST Act

Section 29 lays down the conditions under which GST registration may be canceled or suspended by the proper officer. It also details the consequences and obligations of the taxpayer post-cancellation.

Grounds for Cancellation – Section 29(1)

The proper officer may initiate cancellation on his own motion or upon an application by the registered person (or their legal heirs in case of death). The cancellation must be done as per prescribed rules and time limits. Cancellation can be initiated under the following circumstances:

a) Discontinuation or Transfer of Business

Business has been discontinued permanently.

Ownership transferred due to death, sale, amalgamation, or demerger.

b) Change in Constitution of Business

Structural or legal change in the business constitution.

c) No Longer Liable for Registration

• Not liable under Section 22 or 24.
• Wants to opt out of voluntary registration under Section 25(3).

AUBSP Note: During cancellation proceedings, the registration may be suspended temporarily as per the prescribed rules.

Cancellation by Proper Officer – Section 29(2)

The proper officer is also empowered to cancel the registration with retrospective effect, if necessary, for the following reasons:

a) Contravention of GST Provisions

Violation of GST Act or related rules.

b) Non-filing of Returns – Composition Taxpayer

Not filed annual return for over 3 months beyond the due date.

c) Non-filing of Returns – Regular Taxpayer

Failure to file returns for a continuous period as prescribed.

d) No Business Commenced

Voluntarily registered but did not start business within 6 months.

e) Fraud or Misrepresentation

Registration obtained through fraud, willful misstatement, or suppression of facts.

AUBSP Important: No cancellation shall occur without giving the person an opportunity of being heard. Suspension is also possible during proceedings.

Legal Effect of Cancellation – Section 29(3)

Cancellation does not absolve the registered person of liability:

• All tax dues, penalties, and obligations before the cancellation date must still be paid.
• Applies regardless of when the dues are assessed.

Impact on SGST/UTGST – Section 29(4)

If registration under SGST or UTGST is canceled, it will be automatically deemed canceled under CGST as well.

Payment Obligations After Cancellation – Section 29(5)

A person whose registration is canceled must pay GST on:

Inventory & Assets

• Input tax credit (ITC) on stock, semi-finished or finished goods, capital goods, or plant and machinery as on the day before cancellation.
• Alternatively, pay output tax on such goods, whichever is higher.

Special Rule for Capital Goods

• Pay higher of:
  • ITC availed (less prescribed reduction), or
  • Tax on transaction value as per Section 15.

Manner of Calculation – Section 29(6)

The amount payable under Section 29(5) shall be calculated as prescribed under the GST Rules.

Important Dates Table

In conclusion, Section 29 of the CGST Act serves as a critical control mechanism to ensure compliance and accountability in the GST regime. Whether you’re initiating closure, undergoing reorganization, or facing cancellation by the department, it’s essential to understand your rights and responsibilities.

We always recommend maintaining timely compliance and consulting a professional GST practitioner when facing complex legal situations. Remember, a canceled registration doesn’t end your obligations—it only changes the way they’re enforced.

For more detailed updates, analysis, and compliance support, stay connected with AUBSP.com—your reliable source for authentic GST insights.

FAQs on Cancellation or Suspension of GST Registration

What is Section 29 of the CGST Act, 2017?
Section 29 governs the provisions related to cancellation or suspension of GST registration by the proper officer or on application by the registered person.

When can GST registration be canceled voluntarily?
GST registration can be canceled voluntarily when the business is discontinued, transferred, or no longer liable to be registered under Sections 22 or 24.

Can a legal heir apply for GST cancellation?
Yes, in case of the death of a registered person, the legal heirs can apply for cancellation of GST registration.

What happens to the GST registration during cancellation proceedings?
During cancellation proceedings, the proper officer may suspend the registration temporarily until the final order is passed.

Can the GST officer cancel registration on their own motion?
Yes, the officer has the authority to cancel registration suo motu if any of the prescribed conditions are met.

Is prior notice required before cancellation by the officer?
Yes, the officer must give the person an opportunity of being heard before canceling the registration.

What are the reasons for officer-initiated cancellation under Section 29(2)?
Reasons include contravention of the Act, non-filing of returns, non-commencement of business, or obtaining registration fraudulently.

What is the time limit for business commencement under voluntary registration?
A person must commence business within six months of voluntary registration under Section 25(3).

What if a composition taxpayer fails to file the return?
If a person under Section 10 fails to file the return for a financial year for more than three months past the due date, registration may be canceled.

What is the updated time period for non-filing of returns leading to cancellation?
As of 1st October 2022, registration can be canceled for non-filing of returns for a continuous period as prescribed (earlier six months).

Does cancellation of CGST registration automatically cancel SGST/UTGST registration?
Yes, cancellation under State/UT GST is deemed as cancellation under CGST and vice versa.

Is GST liability waived off after cancellation?
No, cancellation does not absolve the person from tax liability or compliance obligations prior to the date of cancellation.

What dues must be paid on cancellation of registration?
The person must pay tax equal to the input tax credit on stock and capital goods or the output tax, whichever is higher.

How is ITC on capital goods calculated at the time of cancellation?
It is either the reduced input tax credit or the tax on transaction value, whichever is higher.

Can GST registration be canceled retrospectively?
Yes, the proper officer may cancel the registration with effect from a past date as deemed appropriate.

What happens if a fraudulent GST registration is discovered?
The registration will be canceled, and the person will still be liable for taxes and penalties.

Can a suspended GST registration be used for invoicing or tax collection?
No, during the suspension period, the taxpayer cannot issue tax invoices or collect tax.

What is the effect of cancellation on pending returns or dues?
All dues must be cleared, and returns must be filed even after cancellation, for the period up to the date of cancellation.

Is a separate application needed to cancel registration under SGST/UTGST?
No, cancellation under CGST is sufficient, as it applies to both central and state components.

Who is the proper officer for GST cancellation?
The officer as designated by the GST authority under the CGST Rules will act as the proper officer for cancellation.

Are there rules prescribing the manner of cancellation and payment calculation?
Yes, the CGST Rules prescribe the procedures for cancellation and computation of payable tax on stock and capital assets.

What happens to the electronic credit and cash ledger after cancellation?
The amount payable is debited from the electronic credit or cash ledger as per the prescribed calculation.

What documents are required for cancellation application?
Generally, details of stock, tax dues, reasons for cancellation, and supporting documents like death certificate or transfer deed are needed.

Can a canceled GST registration be revived?
Yes, if cancellation was done suo motu and later found incorrect, the officer may revoke it as per rules.