To,
The Office of the Deputy Commissioner
Ward No. …, …..State GST
Room No. ….., … Floor
…City
State, Pincode…..
SUBJECT: – Reply to Notice issued dated ….. for <Trade Name>; <GSTIN> For cancellation of GST Registration for Non-Filing of Returns
Ref ID: __________
Respected Sir,
Greetings!!
1. With reference to the above-captioned subject, we, M/s __________(hereinafter referred as ‘the company’) located at _______________ hereby brings to your kind attention that notice was issued on __________ .
2. Facts of the Case:
- This is in reference to the Show Cause Notice received, Reference No. __________, dated:__-___-2024 issued in the form REG 17 of Goods and Services Tax Act, 2017 for cancellation of registration under section 29(2) for the non-filling of GST return for the continues period of 6 month.
- With this letter we do hereby assure that we are in process of compiling the data and will file our rending GST Returns within ……
- Before moving on to the submission on merits and for the sake of making the submission and at the same time reserving the right to challenge the impugned notice on other grounds, we would like to bring it on record that there was no intention to evade tax though the delay in filing of return was purely unintentional and due to the reasons beyond our control.
3. Provision Related to this Case
We hereby submit following grounds which are independent and without prejudice to one another.
- SECTION 29: CANCELLATION OR SUSPENSION OF REGISTRATION:
(1) The proper officer may, either on his own 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 is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:
Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.
(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 3[the return for a financial year beyond three months from the due date of furnishing the said return]; or
(c) any registered person, other than a person specified in clause (b), has not furnished returns for a 4[such continuous tax period as may be prescribed]; 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 by means of fraud, wilful misstatement or suppression of facts:
Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard:
Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.
(3) the cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder for any period prior to the date of cancellation whether or not such tax and other dues are determined before or after the date of cancellation.
(4) The cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a cancellation of registration under this Act.
(5) Every registered person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed:
Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.
(6) The amount payable under sub-section (5) shall be calculated in such manner as may be prescribed.
- Our understanding of Section 29: Cancellation of Registration:
Initiation of Cancellation:
The proper officer can cancel the GST registration on their own or upon application by the registered person or their legal heirs (in case of the registered person's death).
Circumstances for Cancellation:
- The business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with another entity, demerged, or otherwise disposed of.
- There is a change in the constitution of the business.
- The taxable person is no longer liable to be registered or intends to opt out of voluntary registration.
- During the pending cancellation proceedings, the registration can be suspended as prescribed.
Cancellation by Proper Officer:
- A proper officer may cancel the registration from any date deemed fit, including retrospective dates if:
- The registered person has contravened the Act or rules.
- A person under section 10 has not filed a return for a financial year within three months of the due date.
- A registered person has not furnished returns for a continuous tax period as prescribed.
- A voluntarily registered person has not commenced business within six months from the date of registration.
- The registration was obtained by fraud, willful misstatement, or suppression of facts.
- No cancellation without an opportunity for the person to be heard.
- Suspension of registration may occur during the pending cancellation proceedings as prescribed.
Liability After Cancellation:
- Cancellation does not affect the liability to pay tax and other dues for any period before the cancellation date.
- Obligations under the Act or rules must still be discharged.
Deemed Cancellation:
Cancellation under State or Union Territory GST Act is deemed to be a cancellation under this Act.
Payment Upon Cancellation:
A registered person must pay an amount equivalent to the input tax credit on stock, semi-finished/finished goods, capital goods, or plant and machinery as prescribed, whichever is higher.
For capital goods or plant and machinery, payment should equal the input tax credit reduced by a prescribed percentage or tax on the transaction value, whichever is higher.
Calculation of Amount:
- The amount payable upon cancellation is calculated as prescribed.
- This summary encapsulates the provisions and procedures related to the cancellation of GST registration as per Rule 29, ensuring compliance and due process while safeguarding the government's revenue interests.
4. Our submission and case laws
- We respectfully submit that our registration was cancelled via Form REG-17 due to non-filing of returns. In response, we have provided our reply in Form REG-18, explaining that our business is facing severe financial difficulties. We seek permission to file our pending returns along with the applicable interest on an installment basis. Additionally, we have applied for the revocation of the cancellation of our registration.
- Enclosed is a CA-certified debtors certificate for the fiscal year ending up to the current date, which clearly indicates that our debtor payments have been delayed. We have made every effort to collect these dues, including issuing legal notices, engaging in direct communication, and offering cash discounts for early payment. Proof of these efforts is also enclosed for your reference.
- We would like to place our reliance on the Kerala High Court Judgment in the case of Malyalam Motors Pvt. Ltd. vs Assistant State Tax Officer cited in 2020 Taxo.online 780 where the High Court allowed assessee to file GSTR 1 & pay taxes in installments due to insufficient funds. Details of this case is as follows:
The petitioner, a private limited company, was engaged in the business of automobile sales. In the writ petition, the petitioner stated that though it filed GSTR-1 returns for the months of February, 2020 to May, 2020, but due to Covid pandemic, could not generate funds to make lump sum payment of the admitted tax. It intended to pay the arrears of tax due in installments. But, the department disallowed and expressed its inability to permit the petitioner to pay the arrears of tax in installments.
The petitioner was not in a position to generate the funds necessary for making a lump sum payment of the admitted tax and therefore that the petitioner was seeking a direction from the Court to permit the petitioner to file the returns without paying the entire admitted tax, but ensuring that the payment of admitted tax, together with interest thereon and applicable late fees etc., could be made in quick installments.
The Honorable High Court after considering the facts and circumstances of the case and the submissions made observed that the petitioner was not disputing its liability to tax, or the quantum thereof, for the period in question. In view of the financial difficulties faced by it during the Covid pandemic situation, its business had come to a total standstill. Therefore, the petitioner shall be permitted to discharge the tax liability, inclusive of any interest and late fee thereon, in equal successive monthly installments commencing from 15th November, 2020 and culminating on 15th August, 2021. The Court also made clear that if the petitioner defaults in any single installment, the petitioner will lose the benefit of this judgment.
- WE would like to place our reliance on the judgment of Madras High Court in the case of Asean Aromatics Pvt. Ltd. vs. Assistant Commissioner (Circle) GST cited in 2019 Taxo.online 118 where the Competent Authority had cancelled registration of assessee on ground that GSTR-3B returns had been filed upto December, 2017 and GSTR-1 only upto August, 2018, said authority was directed to consider and pass orders upon assessee's application, wherein it sought leave to pay GST dues in six monthly instalments.
5. ACCEPTANCE AND WORKING
- In light of the aforementioned facts and legal provisions, we respectfully submit that the delay in filing our GST returns was unintentional and occurred due to circumstances beyond our control. We are committed to rectifying this situation by filing our pending returns within the stipulated timeframe. Our financial difficulties have been substantiated by the enclosed CA-certified debtors certificate and additional supporting documents, demonstrating our diligent efforts to address outstanding dues.
- We have also cited relevant case laws that support our position and seek similar consideration in our case. We believe that allowing us to file our pending returns on an installment basis and revoking the cancellation of our GST registration would be in the interest of justice.
Prayer
- Therefore, we respectfully request the following:
- Withdrawal of the Show Cause Notice:
We request that the Show Cause Notice issued for the non-filing of GST returns be withdrawn.
- Acceptance of Pending Returns:
We seek permission to file our pending GST returns along with the applicable interest on an installment basis.
- Revocation of Cancellation:
We request the revocation of the cancellation of our GST registration to allow us to continue our business operations.
- Opportunity for Hearing:
We request an opportunity for a hearing before any adverse order is passed against us, ensuring that our submissions and the enclosed supporting documents are duly considered.
We seek permission to file our pending GST returns along with the applicable interest on an installment basis.
We trust that our submissions and the enclosed supporting documents will receive your favorable consideration. We remain available for any further clarifications or information you may require.
Thanks & Regards
For ……….
Director/Authorized Signatory
Date: 28-May-2024
Place: New Delhi
