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February 16, 2021

GST Registration to be suspended if there are significant differences from the return filed by their suppliers

by CA Shivam Jaiswal in GST

GST Registration to be suspended if there are significant differences from the return filed by their suppliers

The Central Board of Indirect Taxes and Customs (CBIC) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC’s purview.

Registration of an entity is the initial basic step one has to follow to carry on supply or any other GST compliances. While one may find the registration process unnecessary and complicated, it is followed by a number of advantages, such as legal recognition as supplier of goods/services, availment of ITC, legal authorisation to collect tax from customers etc.

In a move aimed at curbing tax evasion and safeguarding revenues, CBIC has directed that GST officers will immediately suspend registration of taxpayers whose sales return or GSTR-1 forms show “significant differences or anomalies” from the return filed by their suppliers. CBIC has issued a Standard Operating Procedure (SOP) for suspension of registration of a person on observance of such discrepancies /anomalies which indicate violation of the GST Act.

Reference given to Rule 21A(2A) of CGST Rules in SOP

Sub-rule (2A) was inserted to rule 21A, vide notification No. 94/2020- Central Tax, dated 22.12.2020.

The said provision provides for immediate suspension of registration of a person, as a measure to safeguard the interest of revenue, on observance of such discrepancies /anomalies which indicate violation of the provisions of Act and rules made thereunder and that continuation of such registration poses immediate threat to revenue.

According to the said rule, where, a comparison of the returns furnished by a registered person under section 39 with:

  • the details of outward supplies furnished in FORM GSTR-1; or
  • the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their FORM GSTR-1

or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended.

The said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within 30 days, as to why his registration shall not be cancelled.

SOP provides for intimation of suspension of registration

  • On the recommendation of the Council, the registration of specified taxpayers shall be suspended and system generated intimation for suspension and notice for cancellation of registration in FORM GST REG-31, containing the reasons of suspension, shall be sent to such taxpayers on their registered e-mail address.
  • Till the time functionality for FORM REG-31 is made available on portal, such notice/intimation shall be made available to the taxpayer on their dashboard on common portal in FORM GST REG-17.
  • The taxpayers will be able to view the notice in the “View/Notice and Order” tab post login.

SOP provides for reply by taxpayers whose registration has been cancelled

The taxpayers, whose registrations are suspended under the above provisions, would be required to furnish reply to the jurisdictional tax officer within 30 days from the receipt of such notice / intimation, explaining the discrepancies/anomalies, if any, and shall furnish the details of compliances made or/and the reasons as to why their registration should not be cancelled:

  • The said person would be required to reply to the jurisdictional officer against the notice for cancellation of registration sent to them, in FORM GST REG-18 online through Common Portal withing the time limit of 30 days from the receipt of notice/ intimation.
  • In case the intimation for suspension and notice for cancellation of registration is issued on ground of non -filing of returns, the said person may file all the due returns and submit the response.
  • Similarly, in other scenarios as specified under FORM GST REG-31, they may meet the requirements and submit the reply.

Other regulations provided by the SOP

  • Post issuance of FORM GST REG-31 via email, the list of such taxpayers would be sent to the concerned Nodal officers of the CBIC/ States.
  • The system generated notice can be viewed by the jurisdictional proper officers on their Dashboard for suitable actions.
  • Upon receipt of reply from the said person or on expiry of thirty days (reply period), a task would be created in the dashboard of the concerned proper officer under “Suo moto cancellation proceeding”.
  • Proper officer, post examination of the response received from the said person, may pass an order either for dropping the proceedings for suspension/ cancellation of registration in FORM GST REG-20 or for cancellation of registration in FORM GST REG-19. Based on the action taken by the proper officer, the GSTIN status would be changed to “Active” or “Cancelled Suo-moto” as the case maybe.
  • Till the time independent functionality for FORM GST REG-31 is fully ready, it is advised that if the proper officer considers it appropriate to drop a proceeding any time after the issuance of FORM GST REG-31, he may advise the said person to furnish his reply on the common portal in FORM GST REG-18

Revocation Regulations provided by the SOP

  • It is advised that in case the proper officer is prima-facie satisfied with the reply of the said person, he may revoke the suspension by passing an order in FORM GST REG-20.
  • Post such revocation, if need be, the proper officer can continue with the detailed verification of the documents and recovery of short payment of tax, if any.
  • Further, in such cases, after detailed verification or otherwise, if the proper officer finds that the registration of the said person is liable for cancellation, he can again initiate the proceeding of cancellation of registration by issuing notice in FORM GST REG-17.

Goods and Services Tax (GST) officers have already intensified their drive against fake invoicing and this has also contributed to increase in tax collections in the past couple of months. GST collections have crossed the Rs 1 lakh crore mark for four consecutive months and surged to an all-time high of about Rs 1.20 lakh crore in January.

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