Reasons for GST Cancellation & how to avoid them

What are the reasons for GST Cancellation & how to avoid them?


The Goods and Services Tax (GST) has drastically changed the tax structure for Indian Companies. However, it’s important to realize that keeping a GST registration current involves maintaining compliance; it’s not a one-time activity. The cancellation of GST is an option if the laws and regulations are violated. In this article, we’ll look at the reasons of GST cancellation and offer tips for avoiding them.

What is GST Cancellation?

GST cancellation refers to the process of discontinuing or revoking a registered entity’s GST registration. It may be required when a business ceases its operations, undergoes a change in the nature of its activities, or no longer meets the threshold for GST registration. Cancellation eliminates the compliance obligations and responsibilities associated with GST, such as filing returns, maintaining records, and paying taxes. The cancellation process involves fulfilling certain requirements and notifying the appropriate GST authorities.

What is the process of GST cancellation?

To cancel a GST registration follow these steps:
  • Submit an application on the GST Common Portal in FORM GST REG-16 along with the required information.
  • On submission of an application for cancellation of GST registration, the GST officer is required to verify the application.
  • After verification, the officer will issue an order in FORM GST REG-19, within 30 days from the date of application.

What are the reasons for GST Cancellation & how to avoid them?

The following are the reasons for GST cancellation of the registered taxpayers:

1. Non-filing of GST Returns

One of the primary reasons for GST cancellation is the non-filing of GST returns. As per the GST law, registered businesses must file their returns regularly, either monthly or quarterly, depending on their turnover. Failure to do so can lead to the authorities initiating the cancellation process.


To avoid this, companies should set up an appropriate structure for filing GST returns. Using GST return filing software or hiring a professional can help ensure timely and accurate filings.

2. Non-Payment of GST Dues

Another common reason for GST cancellation is the non-payment of GST dues. GST-registered entities must clear their tax liabilities within the stipulated time frame. Defaulting on payments not only leads to GST cancellation but can also result in penalties and interest charges.


To avoid this situation, businesses should prioritize tax payments. Regularly reviewing their GST liability and setting aside funds for this purpose can help prevent any defaults.

3. Inactivity

Maintaining GST registration requires an active business operation. If a registered business becomes inactive or ceases its operations for an extended period without proper communication with the authorities, it can trigger the cancellation process.


To avoid GST cancellation due to inactivity, businesses should notify the authorities when they plan to temporarily halt operations. Additionally, ensuring that all necessary compliance requirements are met upon resumption of business is essential.

4. Non-Compliance with Composition Scheme

Businesses registered under the GST composition scheme must adhere to specific rules and regulations. Non-compliance with these guidelines, such as exceeding the prescribed turnover limit or selling goods outside the state, can lead to GST cancellation.


To avoid this, businesses should closely monitor their turnover and ensure they meet all composition scheme requirements. Seeking professional advice when necessary can be beneficial in this regard.

5. Providing Incorrect Information

Submitting incorrect or false information during the GST registration process or subsequent filings can be grounds for cancellation. This includes providing false documents or manipulating financial data.


To avoid this, businesses should maintain accurate records and ensure that all information submitted to the GST authorities is correct. Regular audits and verification of documents can help prevent such issues.

6. Breaking Rule 86B

Using ITC from electronic credit ledger to pay over 99% of tax liability for certain taxpayers breaching Rule 86B – with a total taxable value of supplies over Rs.50 lakh in the month, with exceptions.


Taxpayers can comply with Rule 86B by using different payment methods and not relying solely on ITC, while also monitoring taxable supplies to stay under Rs. 50 lakh monthly limit.

7. Breach of Anti-Profiteering Rules

GST Registration can be canceled for registered individuals who violate anti-profiteering regulations by failing to pass on GST rate reduction benefits to customers.


Registered individuals must monitor GST rate changes for Anti-Profiteering Rules and adjust pricing promptly to pass on benefits to customers, ensuring transparent communication and clear reflection of benefits in pricing.


Businesses should aim to avoid the GST cancellation process because it might be difficult. Businesses can successfully preserve their Goods and Service Tax registration by being aware of the reasons for GST cancellation and taking measures to avoid them such as regular compliance checks, timely payments, and good record-keeping. It’s important to keep in mind that staying educated and getting professional advice when necessary will help to ensure compliance with Goods & Service Tax requirements and prevent the headaches of cancellation.


Categories: Articles GST
Siddhi Jain: Siddhi Jain (B.A.LLB) is a young and passionate Content Writer at Ebizfiling Private Limited. She enjoys reading and writing about legal topics and simplifying complex legal concepts for a wider audience. Her goal is to continue growing as a content writer and to become a subject matter expert in legal and business topics.
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