Kerala HC: GSTIN Cancellation Process Will be Applied If Not Filed GSTR-3B for a Continuous 6 Months

In the recent case of M/s. Sanscorp India Pvt. Ltd. vs. the Assistant Commissioner, Goods and Service Tax Network (GSTN), Union of India – 2023(9) TMI 1002, the Kerala High Court made a significant ruling. The court held that if a taxpayer fails to submit returns for a continuous period of six months, their registration can be cancelled, and they will be subject to interest charges for any delayed payments.

Key Details of The Case

The petitioner, M/s Sanscorp India Pvt. Ltd., is a registered dealer under the Central Goods and Services Tax Act, 2017. The Petitioner failed to submit returns in GSTR 3B From April 2022 to December 2022.

Consequently, the respondent, the Revenue Department, issued a Show Cause Notice to the petitioner, seeking a reasonable answer as to why their GST registration should not be cancelled due to the failure to file returns for a continuous six-month period.

Under Section 29 of the CGST Act, 2017, if a dealer does not file returns continuously for six months, their registration is prone to get cancelled by the authority.

The Adjudicating Authority, through the impugned order dated March 4, 2023, retrospectively cancelled the petitioner’s GST Registration from January 15, 2023.

After the cancellation of registration, the petitioner filed GSTR 3B on July 24, 2023, and paid the tax along with interest. They argued that the GST software was not aligned with the CGST Act and Rules.

The petitioner further contended that if they paid the GST amount and interest, they should not be considered a defaulter for not filing the return. Therefore, they argued that the cancellation of the registration should be deemed invalid and the order restoring the registration should be reinstated.

In response to the impugned order, the petitioner filed a writ before the Kerala High Court, seeking the restoration of the cancelled registration.

Issue About Goods and Service Tax

The main issue before the court was whether the Revenue Department could retrospectively cancel GST registration if the assessees failed to file GSTR 3B for several years.

Kerala High Court Ruling

The Kerala High Court, in the case of M/s Sanscorp India Pvt. Ltd. vs. the Assistant Commissioner, Goods and Service Tax Network (GSTN), Union of India- 2023 (9) TMI 1002, held the following:

The court observed that their registration can be cancelled if a petitioner fails to file returns continuously for six months. The provisions of Section 50 or Section 29 of the Central Goods and Services Tax Act do not conflict with each other.

The court opined that the provisions for cancellation of registration and payment of tax with interest are distinct and serve different purposes, scopes, and intents.

The court noted that the petitioner had an alternative solution available under the CGST Act and Rules, which they should have pursued within the given time limit.

The court further noted that the reasons cannot be considered that the Goods and Services Tax Portal is non-functional, as the entire country files returns and pays taxes using the same software.

The court ruled that if the petitioner fails to submit the full or partial GST amount, the Adjudicating Authority can cancel their GST registration. Moreover, any delayed payments will incur interest charges.