Show Cause Notice (SCN) for Cancellation of Registration (GST REG-17)

Legal Basis: Section 29 of the CGST Act, 2017

Extract of Section 29 of the CGST Act, 2017

Section 29 of the Central Goods and Services Tax (CGST) Act 2017 provides the grounds and procedures for cancelling or suspending GST registration. This section is critical for maintaining compliance within the GST framework, as it outlines the circumstances under which the authorities can cancel a GST registration.

Section 29: Cancellation or Suspension of Registration

(1) The proper officer may, either on his motion or on an application filed by the registered person or by his legal heirs, in case of 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 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 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, willful misstatement or suppression of facts:

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

Show Cause Notice (SCN) for Cancellation of Registration (GST REG-17)

GST REG-17 is a Show Cause Notice issued by the GST authorities when they intend to cancel a taxpayer’s GST registration. This notice requires the taxpayer to explain why their GST registration should not be cancelled based on the reasons mentioned in the notice.

Example Scenario

Consider a scenario where ABC Pvt Ltd has not filed its GST returns for six consecutive months. The GST officer, noticing this non-compliance, issues a GST REG-17 notice to the company, asking why their GST registration should not be cancelled for this failure.

Legal Recourse and Proceedings

Legal Recourse

When a taxpayer receives a GST REG-17 notice, they should:

1. Review the Notice: Carefully examine the reasons for the proposed cancellation as stated in the notice.
2. Prepare a Response: Collect relevant documents and evidence to support your case and prepare a detailed reply addressing the issues raised in the notice.
3. Submit the Response: File the response within the stipulated time frame, typically seven working days from receipt of the notice.

Legal Proceedings

Failure to respond to the GST REG-17 notice or providing an unsatisfactory response can lead to:

• Cancellation of Registration: The GST registration will be cancelled, impacting the taxpayer’s ability to conduct business under the GST regime.
• Additional Proceedings: Based on the grounds of non-compliance cited in the notice, further legal action may be initiated.

Penalties and Prosecution

If the GST registration is cancelled due to non-compliance, the consequences include:

• Monetary Penalties: Penalties under Section 122 of the CGST Act for failure to comply with GST provisions, which may include fines.
• Interest on Tax Dues: Interest on any unpaid tax liabilities arising from non-filing returns or other non-compliance issues.
• Prosecution: In severe cases involving fraud or willful misstatement, prosecution under GST laws may be initiated, including imprisonment and additional fines.

Do’s and Don’ts on Receiving a GST REG-17 Notice

Do’s

1. Read Carefully: Understand the grounds for proposed cancellation and the specific requirements in the notice.
2. Gather Evidence: Collect all necessary documents, such as filed returns, payment receipts, and any correspondence with GST authorities.
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 automatic cancellation.
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 exacerbate the situation and result in 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 cancellation of their GST registration is unjust, they have the following remedies:

1. File an Appeal: Under Section 107 of the CGST Act, the taxpayer can file an appeal against the cancellation order within three months from the order date.
2. Seek a Review: If there are valid grounds for reconsideration, request that higher authorities review the cancellation decision.
3. Reapply for Registration: Rectify the issues that led to the cancellation and reapply for GST registration if necessary.

Conclusion

Section 29 of the CGST Act 2017 provides the framework for cancelling GST registration, ensuring businesses comply with GST regulations. Issuing a GST REG-17 notice is a crucial part of this framework, allowing taxpayers to address any non-compliance issues. Understanding how to respond to such notices, the potential penalties, and the available legal remedies can help businesses maintain compliance and avoid disruptions in their operations.