REG-27 Notice:

Extract of Section 29 of the CGST Act, 2017

Section 29 of the Central Goods and Services Tax (CGST) Act 2017 is a crucial provision that outlines the provisions for the cancellation of GST registration by the proper officer. Understanding this section is key to being informed and prepared, as it provides the circumstances under which a GST registration can be cancelled and the procedure for such cancellation.

Section 29: Cancellation or Suspension of Registration

(1) The ‘proper officer ‘, who is an authorized officer under the CGST Act, may, either on his motion or on an application filed by the registered person or by his legal heirs, in case of the death of such person, cancel the registration in such manner and within such period as may be prescribed, having regard to the circumstances where,—

(a) the business has been discontinued, transferred fully for any reason, including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business or

(c) the ‘taxable person ‘, which refers to a person who is liable to pay tax under the CGST Act, can no longer be registered under section 22 or section 24.

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where—

(a) a registered person has contravened such provisions of the Act, or the rules made thereunder as may be prescribed or

(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d) any person who has taken ‘voluntary registration ‘, which means they have chosen to register for GST even if their turnover is below the threshold, under sub-section (3) of section 25, has not commenced business within six months from the date of registration or

(e) registration has been obtained using ‘fraud ‘, which means intentionally deceiving the authorities, ‘willful misstatement ‘, which means providing false information with the intent to mislead, or suppression of facts:

The proper officer shall not cancel the registration without allowing the person to be heard.

REG-27 Notice

GST REG-27 is a notice issued by the GST authorities to taxpayers whose GST registration has been cancelled. This notice is not to be taken lightly, as it serves as a communication from the tax authorities requiring the taxpayer to submit their response and explain why their registration should not be cancelled, thereby highlighting the seriousness of the situation.

Example Scenario

Suppose a business, XYZ Pvt Ltd, has not filed its GST returns for over six months. The GST officer, noticing this non-compliance, cancels XYZ Pvt Ltd’s GST registration and issues a REG-27 notice, asking the company to explain why their registration should not be cancelled due to this lapse.

Legal Recourse and Proceedings

Legal Recourse

When a taxpayer receives a REG-27 notice, they should:

1. Review the Notice: Carefully read the notice to understand the reasons for the proposed cancellation of the GST registration.
2. Prepare a Response: Gather relevant documents and evidence to support their case and prepare a detailed reply addressing the issues raised in the notice.
3. Submit the Response: File the response within the specified time frame, typically 30 days from receipt of the notice.

Legal Proceedings

If the taxpayer fails to respond ‘adequately ‘, which means not providing enough information or evidence, or if the response is not ‘satisfactory ‘, which means not addressing the issues raised in the notice, the GST authorities may proceed with the following:

• Cancellation of Registration: The taxpayer’s GST registration will be cancelled, affecting their ability to conduct business legally.
• Assessment of Tax Liability: Authorities may assess the tax liability for the period the taxpayer was non-compliant.
• Recovery Actions: If additional tax liability is determined, recovery proceedings may be initiated to collect the outstanding tax, interest, and penalties.

Penalties and Prosecution

Penalties for non-compliance with a REG-27 notice can include:

• ‘Monetary Penalty ‘: Penalties under Section 122 of the CGST Act for failure to comply with GST provisions, which may include fines of up to [specific amount or percentage of tax liability].
• Interest: Interest on the unpaid tax as per Section 50 of the CGST Act.
• Prosecution: In cases of willful evasion or fraud, prosecution under GST laws may be initiated, leading to severe penalties and imprisonment.

Do’s and Don’ts on Receiving a REG-27 Notice

Do’s

1. Read Carefully: Understand the specific reasons for the proposed cancellation of the GST registration.
2. Gather Evidence: Collect all necessary documents and information to support your case.
3. Consult a Professional: Seek advice from a GST practitioner or tax consultant to formulate a strong response.
4. Respond Promptly: Submit your response within the specified deadline to avoid cancellation of the registration.
5. Maintain Records: Keep copies of the notice and your response for future reference.

Don’ts

1. Ignore the Notice: Ignoring the notice will lead to the cancellation of your GST registration.
2. Delay Response: Delaying your response can result in the cancellation of registration and additional penalties.
3. Provide Incomplete Information: Ensure all the information and documents submitted are complete and accurate.
4. Disregard Professional Advice: Always consult with a professional if you are unsure about the content or implications of the notice.

Legal Remedy

If a taxpayer believes that the notice is unjust or if the registration is cancelled despite providing the necessary information, the following remedies are available:

1. Appeal: The taxpayer can file an appeal against the cancellation of the registration under Section 107 of the CGST Act within three months from the date of the cancellation order.
2. If there are ‘valid grounds ‘, such as new evidence or a procedural error, to believe that the cancellation was not justified, request a review of the decision by higher authorities.
3. If the registration is cancelled, the taxpayer can ‘rectify the issues highlighted’ by the proper officer, such as filing overdue returns or paying outstanding taxes, and then ‘reapply for GST registration’ through the usual registration process.

Conclusion

Section 29 of the CGST Act 2017 provides the framework for the proper officer to cancel GST registration. The GST REG-27 notice is integral to this process, allowing taxpayers to address any issues or discrepancies leading to the proposed cancellation. Understanding how to respond to this notice is crucial for ensuring timely resolution and compliance with GST laws. By following the dos and don’ts and knowing the legal remedies available, taxpayers can navigate the cancellation process smoothly and avoid potential legal issues.