When and Why You Should Cancel Your GST Registration in India?
Introduction:
Not every business needs to stay registered under GST forever. If you’re shutting down your business, switching your business type, or your turnover has reduced below the required limit, you may need to cancel your GST registration. Doing it at the right time can save you from penalties and reduce your legal workload.
What is GST Registration Cancellation?
GST registration cancellation means removing your business from the GST system. After cancellation, you are no longer required to:
- File GST returns
- Collect GST from customers
- Claim input tax credit (ITC)
Who Needs to Cancel GST?
You should cancel your GST registration if:
- Your business has permanently shut down
- Your business has been sold or transferred
- Your annual turnover is below the GST threshold limit
- You registered voluntarily but don’t need GST anymore
Who Can Cancel GST Registration?
Business Owners:
- If you voluntarily registered and now don’t meet the criteria, you can cancel it.
- If your business is closed or turnover is low, cancellation is an option.
GST Department:
The department can cancel your registration if:
- You don’t file returns on time
- You break GST rules
- Your registration is found to be fake or incorrect
Before cancelling, the department will issue a show cause notice.
Common Reasons for GST Cancellation:
- Business Closure: If you’ve permanently shut your business.
- Low Turnover: Below ₹20 lakh (services) or ₹40 lakh (goods).
- Business Sold or Transferred: New owner must apply for fresh registration.
- Change in Tax Type: Switching between Composition and Regular Scheme.
Documents and Information Required:
To cancel your GST registration, you need:
- GSTIN and business details
- Reason for cancellation
- Stock and tax liability info
- Address and contact details
- Supporting documents (if needed)
Step-by-Step GST Cancellation Process:
- Step 1: Log in to www.gst.gov.in
- Step 2: Go to Services > Registration > Application for Cancellation
- Step 3: Fill out Form REG-16
- Step 4: Submit the application
- Step 5: Track using ARN (Application Reference Number)
- Step 6: Officer review and issue of cancellation order (Form REG-19)
What Happens After Cancellation?
- No GST Returns Needed: You don’t have to file monthly/quarterly returns.
- Final Return Required: GSTR-10 must be filed within 3 months of cancellation.
- ITC Loss: Unused Input Tax Credit will lapse.
Mistakes to Avoid:
- Delaying Cancellation: Leads to fines and notices.
- Ignoring Notices: Always respond to GST department queries.
- Skipping GSTR-10: Final return is mandatory.
Effects of Cancellation:
- Less Compliance Work: No need for GST bookkeeping or returns.
- No ITC Claims: You can’t claim input tax credit post-cancellation.
- Proper Closure: Helps you legally close your tax obligations.
Benefits of Cancelling GST at the Right Time:
- Avoid penalties
- Less legal burden
- Smooth closure of business
- No risk of government action for non-compliance
How Long Does the Process Take?
Usually 7 to 15 working days, depending on:
- Complete application
- Officer’s review
- Any document clarification needed
Final Thoughts:
Cancelling GST registration is not just a formality – it’s an important legal step. If your business no longer needs to be under GST, it’s best to cancel the registration on time. This helps you avoid penalties and stay legally safe. Need help with GST cancellation? Consider consulting a GST expert or tax professional for smooth and error-free processing.
