GST Registration Cancellation (REG-16): Process & After-Effects

When to cancel GST registration

Voluntary GST cancellation makes sense when:

• Business closed/wound up — No more taxable supplies
• Falls below threshold — Turnover dropped below ₹40 lakh / ₹20 lakh
• Change in constitution — Sole prop to Pvt Ltd, partnership to LLP
• Death of proprietor — Sole proprietorship
• Transfer of business — Merger, demerger, sale

NOT cancellation reasons:

• Slow business — Keep registration active to claim ITC when activity resumes
• Temporary pause — File NIL returns instead

Process — Form REG-16

1. Login to gst.gov.in → Services → Registration → Application for Cancellation
2. Fill Form REG-16 with:
   • Reason for cancellation
   • Effective date (cannot be backdated; future date allowed)
   • Details of inputs/inputs in semi-finished/finished goods in stock as on date
   • Outstanding ITC to be reversed
   • Tax liability on stock (closing stock)
3. Pay tax on inputs/stock (treated as if you self-supplied)
4. Submit using DSC (Pvt Ltd/LLP) or EVC (others)
5. GST officer reviews within 30 days
6. If approved, cancellation order in Form REG-19
7. GSTIN status changes to 'Cancelled' on portal

Tax payable on cancellation — Important

Per Section 29(5), at the time of cancellation:

1. Pay tax on closing stock — Calculate ITC on closing inputs/inputs in semi-finished and finished goods. Pay this back to government (essentially reversing ITC for unused inputs).
2. Higher of: Input tax credit claimed OR Output tax on transactional value of supply
3. Capital goods: Pay tax on the lesser of unutilised ITC (using reduction at 5% per quarter) or transactional value-based tax

This cancels out the ITC benefit you got while business was active. Failure to pay = cancellation rejected.

Final return — GSTR-10

Within 3 months of cancellation, file GSTR-10 (Final Return):

• Details of inputs/capital goods held on date of cancellation
• Tax payable on these
• Confirmation of all outward supplies up to cancellation date
• Reconciliation of cash and credit ledger

Late filing: ₹100/day capped at ₹5,000. Without GSTR-10, the cancellation is incomplete; refund of any cash balance also won't be processed.

After-effects of cancellation

• Cannot collect GST from any customer after cancellation date
• Cannot claim ITC on any subsequent purchases
• Existing customers may stop buying (they need ITC, you can't supply with tax)
• Cannot issue tax invoice — Use 'Bill of Supply' for any post-cancellation activity
• If business resumes — Apply for fresh GST registration (new GSTIN, fresh process)
• E-way bills cannot be generated
• Returns are blocked — No further GSTR-1, 3B (only GSTR-10 once)