The Delhi High Court recently ruled on a case regarding the retrospective cancellation of a taxpayer’s Goods and Services Tax (GST) registration. The petitioner, engaged in garment manufacturing and trading, applied to amend their registered address in July 2023. Despite the petitioner’s claim of no knowledge about additional documentation requests, their application was rejected, leading to a show cause notice in September 2023 and subsequent cancellation of registration effective from December 2021.

The petitioner submitted a response in January 2024 with the required documents, but the authorities deemed it belated. The High Court noted that the show cause notice and cancellation order lacked details regarding alleged invoices issued without an underlying supply of goods or services, rendering them unsustainable. Section 29(2) of the GST Act allows retrospective cancellation if certain circumstances are met, but the decision must be based on objective criteria, not mere non-filing of returns. Retrospective cancellation consequences, like denial of input tax credit to customers, warrant careful consideration and justification.

The court emphasized the necessity for proper reasoning behind retrospective cancellation and the taxpayer’s right to notice. Since neither was provided, the court set aside the show cause notice and cancellation order, restoring the petitioner’s GST registration.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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