March 13, 2021

Standard Operating Procedure (SOP) for suspension of registration under Rule 21A(2A)

A new Rule 21A(2A) was inserted under CGST Rules, 2017 vide Notification no. 94/2020- Central Tax dated 22 December 2020. Rule 21A(2A) provides for immediate cancellation of GST registration of any person who is violating the provisions of CGST Act to protect the interest of revenue.

1. Rule 21A(2A): Suspension of GST Registration

Rule 21A(2A) contains following provisions related to cancellation of GST Registration:

Following comparison shall be carried out of a person:
- GST Output supply declared in Form GSTR-3B with details of outward supply furnished in Form GSTR-1.
- GST Input claimed in Form GSTR-3B with ITC auto-populating in GSTR-2A/GSTR-2B of the person.
- On any other basis, as may be recommended by GST Council.
If major anomalies and differences are found during such comparison indicating contravention of provisions of CGST Act then registration of such person shall be suspended.
An Intimation about suspension of GST registration shall be given in Form GST REG-31 on common portal or on registered email id of the person.
Differences found shall be highlighted in notice and such person is required to explain within 30 days that why his registration should not be cancelled.

2. Issue: Not development of Form GST REG:31

Due to non-development of Functionality of Form GST REG-31, the issue was faced in proper implementation of provisions of Rule 21A(2A).

3. Clarification: Circular No. 145/01/2021-GST dated 11th Feb, 2021

For smooth implementation of provisions of Rule 21A(2A) of CGST Rules, Central Board of Indirect Taxes (“CBIC”) has issued circular No. 145/01/2021-GST to clarify the procedure of suspension of GST registration till the time functionality of Firm GST REG-31 is being developed.

4. Procedure of GST registration cancellation under Rule 21A(2A)

Till the time functionality of Form GST REG-31 is not developed, notice/intimation of cancellation of GST registration under Rule 21A(2A) shall be given in Form GST REG-17-”Show Cause Notice for Cancellation of Registration”.

Taxpayers will be able to view this notice under the “View/Notice and order” tab post login at GST portal.

Taxpayer, to whom notice is issued, shall furnish a reply within 30 days that why his GST registration should not be cancelled and details of compliances made pursuant to such notice.

Reply shall be furnished by taxpayer in Form GST REG-18 online through a common portal within 30 days from date of receipt of notice/intimation.

If a taxpayer can meet the reasons (as specified in form GST REG-18/GST REG-31), due to which the cancellation/suspension of registration is proposed, then he can fulfill such requirement and then submit the response.

For example; if the reason for the suspension/cancellation of registration is non filing of returns, then the said person may file all the due returns and submit the response after filing pending returns.

Post issuance of notice in form GST REG-17/GST REG-31, list of such taxpayers shall be shared with concerned Nodal GST officers and system generated notice can be viewed by the Jurisdictional proper Officer on his dashboard for further action.

After receiving a reply from the taxpayer or upon expiry of 30 days, a task will be created for concerned jurisdictional officers under “Suo Moto Cancellation Proceedings”.

After examining the response received by such a person, proper officer may either pass the order for dropping the proceedings of suspension/cancellation of GST registration in Form GST REG-20 or he may confirm the cancellation of GST registration in Form GST REG-19.

Until the functionality of intimation/order in the form GST REG-31 is fully ready on the portal, the proper officer, if he thinks appropriate, may drop the proceedings anytime after issuance of notice in form GST REG-31, then he may advice said person to furnish the reply on the portal in form GST REG-18.

If proper officer is satisfied with response submitted by the taxpayer then he may revoke the suspension by issuing notice in form GST REG-20.

On the other hand, if needed, the proper officer may continue detailed verification of the documents and recover the short payment of tax, if any. However, if after the detailed verification or otherwise, if the proper officer discovers that the registration should be cancelled then he can initiate the proceeding for cancellation of registration (by issuing form GST REG-17).

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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GST registration can’t be cancelled with retrospective effect mechanically| GST Officer must provide reason for such action

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