Circular for implementing new law on Suspension of GST Registration

The Central Board of Indirect Taxes and Customs (CBIC) has issued a new standard operating procedure (SOP) for taxpayers under GST. The SOP was issued on 11th February 2021 vide the CGST Circular 145/01/2021. It provides the procedure for the temporary implementation of the CGST Rule 21A(2A). The sub-rule was recently introduced to add another criterion for the suspension of GST registration.

As per the new sub-rule, any significant discrepancies or anomalies between the GSTR-1, GSTR-2A vis-à-vis GSTR-3B for a tax period that contravenes the GST provisions will attract suspension of the GSTIN. Moreover, a show-cause notice shall be issued to the taxpayer on why the GST registration need not be cancelled. The new sub-rule is being implemented from 1st January 2021.

The form GST REG-31 was notified for the show cause notice but it is yet to be developed by the department in hand with the GST Network. Until then, the notice for cancellation of the GST registration under this new sub-rule shall be sent out in the existing form GST REG-17. The intimation shall be conveyed to the taxpayer via email and published on his GST portal account.

The taxpayers who have received this notice must reply within 30 days from the date of receipt of the notice. He must explain the reasons for differences pointed out in the notice along with details of the compliances fulfilled. For this purpose, the taxpayer must use the form GST REG-18 and reply on the GST portal itself.

The system shall automatically pick up the list of taxpayers to whom this notice was issued and share it across the jurisdictional officers in India. Upon the expiry of the thirty days of the notice period or after the reply, the officers can view a task list on the dashboard known as “Suo moto cancellation proceeding”. Each of the tasks can be picked up one by one. 

Where the officer examines the reply towards the notice and is satisfied with it, he may drop the proceedings in form GST REG-20. Alternatively, if he does not consider that the reply is apt or has not received any reply within the deadline, he can cancel the GST registration in the form GST REG-19.

The action taken by the officer can lead to the GSTIN getting an updated status of “Cancelled Suo-moto” or may retain its status as “Active”. Suppose, the officer receives the reply at any later point of time, he may drop proceeding in form GST REG-20.

The entire process is expected to become smooth for taxpayers and the officers while ensuring transparency in the proceedings. However, a taxpayer must avoid confronting such a situation and try to reconcile the GSTR-1 with GSTR-3B periodically. Also, the matching of input tax credit between GSTR-2B and purchase register must be taken up before filing the GSTR-3B.

The new form GST REG-31 will also be similar to the REG-17, except that the format is specific to the contravention given under the sub-rule 2A of the CGST Rule 21A. The format was simultaneously released together with the amendment vide CGST notification number 94/2020 dated 22nd December 2020. However, the new notice must be incorporated into the GST system which will take some time for its adoption and testing.

It is to be noted that whenever the CBIC notifies any change in the GST law, there is a considerable time taken to effect the changes on the GSTN system. On the other hand, the GST Council may have recommended some changes through its council meeting, mostly held once in three months. However, the CBIC would have lagged in notifying the changes recommended by the Council.  Since not all taxpayers are technologically sound, it takes time for them to receive and adapt to the system changes. 

Hence, the government must look into this matter seriously and should reduce such gaps in the implementation of the GST law.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in