These amendments are made to Rules 21, 36 & 86. Additional grounds of Cancellation of GST registration complicates the practical operations of the business and the assessee suffers a lot as it can not issue GST invoice any longer neither it can generate e-way bill.
We will deliberate the changes here and how these changes are going to challenge the principles of natural justice.
Additional Grounds for Cancellation of Registration
- does not conduct any business from the declared place of business;
- issues invoice or bill without supply of goods or services in violation of the provisions of the Act, or the rules made thereunder; or
- violates the provisions of section 171 of the Act or the rules made thereunder.
- violates the provision of rule 10A.
- avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
- furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax periods; or
- violates the provision of rule 86B
Impact of amendment of Rule 21
Previously the Commissioner did not have a prescribed Rule for cancelling the registration incase of Sec 16 violation or when there was a major difference between outward tax liability as per GSTR 3B and outward tax liability as per GSTR 1. Now with the insertion of clauses (e) & (f) in Rule 21, the Commissioner shall also have the prescribed powers to cancel GST Registration in case there is non-compliance as per Sec 16.
Sec 16(2)(c) requires proof of payment of tax by the supplier. Hence, in case the amount of GST paid by the recipient to the supplier is ultimately not paid to the Govt., the dept. may invoke Rule 21. Furthermore, Rule 21A(2) provides that atleast suspension of GST Registration may be done in case of violation of Rule 21. The suspension can now happen even without a hearing. The vires of Rule 21A(2) with Article 14 of The Constitution may be tested in time to come.
No Natural Justice for Suspension of Registration!
21A(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under Section 29 or under Section 21 he may after affording the said person reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.
Impact of amendment of Rule 21A (2)
Rule 21A(2) provides that suspension of GST Registration may be done in case there is reason to believe that there is a violation of Rule 21 or Section 29. The suspension can now happen even without a hearing.
Reason to believe should ordinarily be strong enough and one expects that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able of issue invoices or waybills till such suspension continues.
The vires of Rule 21A (2) with Article 14 of The Constitution may be tested in time to come.
SCN in case of differences as per some analysis
Rule 21A (2A) Where a comparison of then returns furnished by a registered person under section 39 with –
- the details of outward supplies furnished in FORM GSTR-1;
- 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 the cancellation of registration of the said person, his registration shall be suspended and 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 a period of thirty days, as to why his registration shall not be cancelled
Impact of amendment of Rule 21A (2A)
Again Rule 21A (2A) is a stringent Rule whereby in case of significant differences between GSTR 2A & GSTR 3B or between GSTR 1 & GSTR 3B, suspension of GST Registration can be invoked immediately and in future cancellation, pf GST Registration too can be invoked. One expects here too, that the department shall be careful in implementing suspension as an invocation of this provision would result in a standstill of the business of the taxpayer whereby it would not be able of issue invoices or waybills till such suspension continues.
Addition of Rule 21A (3A)
(3A) A registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A), shall not be granted any refund under section 54, during the period of suspension of his registration.
U/r 138E: Waybills will also be suspended for such Taxpayers
Impact of amendment of Rule 21A (3A) & 138E
Rule 21A (3A) is in addition to earlier Rules whereby in case suspension of GST Registration refunds will be denied. Also under Rule 138E, waybills will be blocked.