Legal basis: Section 29 of CGST Act read with Rules 20 & 22.
## 1. Two Routes for Cancellation
### A. Voluntary Cancellation by Registered Person
The registered person (or legal heirs in case of death) may apply for cancellation. Example: legal heirs applying upon death of the proprietor.
### B. Suo-Motu Cancellation by the Department
The Proper Officer cancels registration where the registrant is no longer doing business from the declared PoB or issues tax invoices without effecting actual supply, etc.
## 2. Grounds for Cancellation by Registered Person / Department [Sec 29(1)]
1. Business discontinued.
2. Business transferred fully (including death of proprietor) for any reason.
3. Amalgamated with another legal entity.
4. Demerged.
5. Otherwise disposed of.
6. Change in constitution of business.
7. Taxable person no longer liable to be registered under Sec 22/24, or who intends to opt out of voluntary registration.
## 3. Grounds for Suo-Motu Cancellation by PO [Sec 29(2)]
PO can cancel from any date, including a retrospective date, after giving an opportunity of being heard, in the following cases:
1. Contravention of prescribed provisions (Rule 21 — see below).
2. Registration obtained by fraud, wilful misstatement, or suppression of facts.
3. Non-filing of returns for the specified period (see (h) & (i) below).
4. Voluntarily registered person has not commenced business within 6 months from date of registration.
5. Composition taxpayer has not furnished return for a FY beyond 3 months from the due date.
Registration is liable to be cancelled if the registered person:
Clause
Contravention
(a)
Does not conduct any business from the declared place of business
(b)
Issues invoice/bill without actual supply of goods/services, violating the Act and rules
(c)
Violates Section 171 (anti-profiteering)
(d)
Violates Rule 10A (bank account details)
(e)
Avails ITC violating Section 16 or rules thereunder
(f)
Furnishes details of outward supplies in GSTR-1/GSTR-1A in excess of outward supplies declared in valid GSTR-3B return under Sec 39
(g)
Violates Rule 86B (1% mandatory cash payment of output tax)
(ga)
Violates third or fourth proviso to Rule 23(1) (revocation of cancellation)
(h)
Monthly return filer under Sec 39(1) — fails to furnish returns for a continuous period of 6 months
(i)
Quarterly return filer under proviso to Sec 39(1) — fails to furnish returns for a continuous period of 2 tax periods
Worked example
### Example 1
Example 1 (Voluntary): Mr. P, a proprietor, dies on 1st June. His legal heirs apply for cancellation on 25th June.
→ Permissible voluntary cancellation under Sec 29(1)(a) — business transferred due to death.
### Example 2
Example 2 (Suo-motu — non-filing): XYZ Co. is a monthly GSTR-3B filer. It has not filed returns from April to September (6 months).
→ Rule 21(h) triggered → PO may cancel registration.
→ Opportunity of being heard must be given before cancellation.
### Example 3
Example 3 (Voluntary registration — no business): Mr. R obtained voluntary registration on 1st January but has not commenced business by 1st July (6 months elapsed).
→ Sec 29(2)(d) → PO may cancel registration after hearing.
### Example 4
Example 4 (Retrospective cancellation): PO discovers in November that ABC Co. has been issuing fake invoices without supply since June.
→ Cancellation can be made effective from June (retrospective date) under Sec 29(2)(e).
⚠️ Common exam mistakes
Forgetting that PO can cancel registration retrospectively under Sec 29(2) — not just prospectively.
Confusing the non-filing thresholds: monthly filers = 6 months continuous; quarterly filers = 2 tax periods continuous; composition = 3 months beyond FY return due date.
Believing PO can cancel without hearing — opportunity of being heard is mandatory before cancellation.
Treating clause-wise contraventions in Rule 21 as exhaustive of Sec 29 — note Sec 29(2) also covers fraud, non-commencement, non-filing independently.
Missing that voluntary registrants get 6 months to commence business — failure attracts cancellation.
Bare-Act text Section 29(1), 29(2); Rule 21 · CGST Act, 2017 · click to expand
Section 29(1): The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration... having regard to the circumstances where, — (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or (b) there is any change in the constitution of the business; or (c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily.
Section 29(2): The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where, — (a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or (b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or (c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or (d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or (e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts: Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.