Standard Operating Procedure for Suspension of GST Registration
As per the circular issued by Central Board of Indirect Taxes and Customs dated 11/02/2021, the Standard Operating Procedure for suspension of registration have been provided:
- When as per Rule 21A (2A)[herein referred to as ‘the rule’] registration get suspended: The rule has been inserted to the CGST Rules vide notification No. 94/2020- CT , which provides for immediate suspension of registration of a person on observance of such discrepancies which indicate violation of the provisions of this Act.
The proper can suspend a GST registration if he finds ‘Significant Anomalies’ between the values of
- GSTR3B Turnover Values vs GSTR1 Turnover Values as declared by the registered person
- ITC as per GSTR3B of the registered person vs GSTR1 Value filed by his suppliers
- Intimation/SCN of Suspension in Form REG 31: The rule provides for suspension of registration and the person shall be informed in FORM GST REG-31, highlighting the differences and asking him to explain why his registration shall not be cancelled, within 30 days.
- Role of REG-17 and REG-18:Till the independent functionality of FORM GST REG-31 is developed, following guidelines to be adopted:
- On recommendation of the council, registration of the taxpayer shall be suspended, and such notice shall be made available to taxpayer in FORM GST REG-17 on common portal under “View Notice/Order” tab.
- The taxpayer would be required to reply to the jurisdictional officer against notice of cancellation of registration within 30 daysfrom the date of receipt of notice/intimation, in FORM GST REG-18.
- In case notice is issued on the ground of ‘non-filing of returns’, the taxpayer may file all the due returns and then submit the response to the jurisdictional officer under FORM GST REG-18.
- After issuance of the notices, list of the taxpayers will be sent to nodal officer of CBIC/States for taking suitable actions. After the expiry of 30 days or on receipt of reply from the taxpayer, a task would be created on the dashboard of nodal officer under “Suo moto cancellation proceeding.”
- Issuance of order by proper officer either in Form REG 20 or REG 19:Proper officer, after examination may pass order for dropping the proceedings or cancellation of registration;
- Proper officer will pass order in FORM GST REG-20,if proceedings are dropped.
- And, proper officer will pass order in FORM GST REG-19, if registration is cancelled.
- After proper officer has passed the orders, the GSTIN status of the taxpayer will be changed to ‘Active’ or ‘Cancelled SuoMoto’.
- After revoking the suspension, proper officer can continue detailed verification, and after verification if he finds that registration is liable to be cancelled, he will again initiate the cancellation proceedings by issuing notice in FORM GST REG-17.
Effect on industry
However, prior to this SOP, the serving of notice and opportunity of being heard was used to be provided prior to suspension of gst but after the implementation of this SOP, the proper officer have an authority to suspend the registration immediately and after suspension a notice can be served to registered person in order to get required clarifications from such registered person.
Such power of Proper Officer to suspend the GST Registration will adversely affect the working of such registered person as once the GST Registration is suspended, his E-way bill portal will also be blocked.
Such suspension will restrain such tax payer to do any transaction till such suspension is taken back by Proper Officer..
Our view on this SOP is that there is no need of fear of suspension of GST Registration as Proper Officer will initiate such action of suspension only when there are reasons of doubt on anomalies in GST returns and not otherwise. Therefore, tax payers must ensure due compliances of GST Act and rules to avoid any punitive action from Proper Officer.
REALTY AND HOW IT CAN BE MISUSED:
Realty is that matching of ITC will be with GSTR1 of supplier.
However, Proper officer may misinterpret circular and may start comparing the value of ITC claimed in GSTR2B and GSTR3B and may initiate suspension of GST Registration. But such comparison may not be always correct and this SOP may be misused. For example:
- There are chances that tax payer claims ITC in the month of say Feb’21 but Supplier filed his returns in the months like april’2020 to Dec’2020, therefore in this case there will be differences in GSTR2B and GSTR3B but there is no tax evasion.
- According to GST Acts, tax payer has an option to claim ITC upto September 30 of succeeding month and in case where taxpayer is making purchases during the year but avails ITC in succeeding year then there will discrepencies but not tax evasion.
- Where a supply is reported in GSTR1 of say Jan’21 but taxpayer somehow forgot to consider it in GSTR3B of same month and now considering it in succeeding month say Feb’21 then there will be a situation where the GSTR1 of such taxpayer will be higher than the GSTR3B. In this case, there may be chances of suspension of GST Registration even though there is no tax evasion.
Therefore, Proper Officer, before initiating the suspension of GST Registration should consider the above said facts to avoid undue harassment to honest taxpayer.
What should taxpayer do to avoid suspension of registration:
In order to avoid suspension of GST Registration, taxpayer must follow below said steps before filing of GSTR3B:
- Always download GSTR2B in order to check if amount of ITC which he is going to claim in its GSTR3B, is exceeds the value as reflecting in GSTR2B
a) Where the value of ITC claim in GSTR3B exceeds with the values as reflecting in GSTR2B then
i) Download GSTR2A for cumulative period of Apr’20 to Feb’21 and verify if all invoices against which taxpayer is claiming ITC are reflecting in GSTR2A of any of the past months
ii) And in case, all such invoices are reflecting, then GSTR3B may be filed.
iii) However, where all such invoices are not reflecting in either GSTR2A or GSTR2B of any of the past months, then it would be advisable to not to claim ITC of such invoices in GSTR3B.
iv) And such ITC must not be availed till the time the supplier files its GSTR1 and is reflecting in taxpayer’s GSTR2A/ GSTR2B.
v) Taxpayer is required to track those invoices every month and if Supplier delays his GSTR1 filing, then follow up must be done with such supplier to ensure that he files his GSTR1.
vi) It is pertinent to note that a new facility of communication in between taxpayers, which was discussed in last month edition, where communication can be done in case supplier does not uploads invoices in his GSTR1.
In this manner, the suspension of GST Registration may be avoided and in case, Proper Officer still issues order of suspension of GST registration then Assessee can immediately file his workings with Proper Officer for cancellation of such suspension order.