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Direct and Indirect Taxation · Registration

Cancellation of GST Registration under Section 29

Updated 10 October 2026 · Fact-checked

Under Section 29 of the CGST Act, 2017, the proper officer can cancel a GST registration on his own motion or on an application by the registered person or legal heirs. Grounds are in Section 29(1) and 29(2). After cancellation, tax dues remain payable and ITC on stock and capital goods must be paid back.

Understand Cancellation of Registration

Registration is not permanent. Section 29 allows it to end in two ways: the officer cancels it, or the registered person (or his legal heirs, if he dies) applies for cancellation.

Under Section 29(1), the officer may cancel, on his own motion or on application, where: (a) the business is discontinued, fully transferred for any reason including death of the proprietor, amalgamated, demerged or otherwise disposed of; (b) there is a change in the constitution of the business; or (c) the taxable person is no longer liable to be registered under section 22 or 24, or wants to opt out of a voluntary registration under section 25(3).

Under Section 29(2), the officer may cancel from any date, including a retrospective date, where: (a) the person has contravened prescribed provisions of the Act or Rules; (b) a composition taxpayer under section 10 has not filed the return for a financial year beyond three months from its due date; (c) any other registered person has not filed returns for such continuous tax period as may be prescribed; (d) a voluntarily registered person has not started business within six months of registration; or (e) registration was obtained by fraud, wilful misstatement or suppression of facts.

The officer cannot cancel under 29(2) without giving the person an opportunity of being heard. While cancellation proceedings are pending, the registration may be suspended as prescribed.

Cancellation does not wipe out the past. Section 29(3) says tax and other dues for any period before the cancellation date stay payable, even if determined later. Section 29(5) also requires payment of an amount equal to the ITC on inputs in stock, inputs in semi-finished or finished goods, and capital goods, or the output tax on them, whichever is higher. Cancellation under the State or UT GST Act is deemed cancellation under the CGST Act (Section 29(4)).

Key rules to remember

Amount payable on cancellation (stock and inputs)
Payable = higher of (ITC on inputs held in stock and inputs in semi-finished/finished goods) and (output tax on those goods)
Section 29(5). Computed on the day immediately preceding the date of cancellation. Paid by debit to the electronic credit or cash ledger.
Amount payable on capital goods or plant and machinery
Payable = higher of (ITC taken on the capital goods reduced by prescribed percentage points) and (tax on transaction value under section 15)
Proviso to Section 29(5). The prescribed reduction percentage comes from the Rules; do not invent it. Use the rate given in the question.
Application by registered person
FORM GST REG-16 within 30 days of the event warranting cancellation
Rule 20. Must include details of inputs and capital goods in stock, liability and payment made.
Show cause notice by officer
FORM GST REG-17; reply in FORM REG-18 within 7 working days of service
Rule 22(1) and (2).
Order of cancellation
FORM GST REG-19 within 30 days of the application or the reply to the notice
Rule 22(3). Cancellation takes effect from a date decided by the officer. If the reply is satisfactory, proceedings are dropped in FORM GST REG-20.
Revocation by the registered person
FORM GST REG-21 within 90 days of service of the cancellation order; extension up to a further 180 days on sufficient cause
Rule 23. Applies where the officer cancelled on his own motion. Extension is given by the Commissioner or an officer not below Additional or Joint Commissioner.

How to solve Cancellation of Registration questions

Use this order for any question on cancellation, whether it is a case study, a short note or a numerical.

  1. 1Identify who is acting: the officer on his own motion, or the registered person or legal heirs by application.
  2. 2Match the facts to the ground. Business closed, transferred or constitution changed points to Section 29(1). Non-filing, fraud, contravention or non-commencement points to Section 29(2).
  3. 3Check the procedure. Self-application: REG-16 within 30 days. Officer: REG-17 notice, 7 working days to reply, hearing, then REG-19 order or REG-20 drop.
  4. 4Fix the effective date. Under 29(2) the officer may choose any date, including a retrospective one.
  5. 5State that past liability continues under Section 29(3), whether determined before or after cancellation.
  6. 6Compute the Section 29(5) payment: for inputs and goods in stock, higher of ITC or output tax; for capital goods, use the proviso.
  7. 7Conclude with any remedy: revocation under Section 30 and Rule 23 where the officer cancelled on his own motion.

Quickest way: Ground-to-form shortcut

When to use it: For MCQs and short case-based questions where you must name the ground, form or time limit quickly.

  1. Business-event wording (closed, transferred, merged, demerged, death, constitution change, below threshold) means Section 29(1).
  2. Default wording (returns not filed, fraud, contravention, no start within six months) means Section 29(2) with a hearing.
  3. Remember the numbers: 30 days (REG-16 filing and officer's order), 7 working days (reply), 90 days (revocation), 3 months (composition annual return), 6 months (voluntary registration not started).
  4. For payment, always pick the higher of ITC and output tax for stock.

Common mistakes in Cancellation of Registration

  • Thinking cancellation ends all liability.

    Students assume the person leaves the GST system fully.

    Fix: Quote Section 29(3): tax and dues for periods before cancellation remain payable, even if determined later.

  • Mixing up Section 29(1) and 29(2) grounds.

    Both lists look similar and are memorised together.

    Fix: Link 29(1) to business events or ceasing to be liable, and 29(2) to defaults or misconduct.

  • Taking only ITC as the payment on stock.

    Students forget the 'whichever is higher' wording.

    Fix: Compute both the ITC and the output tax on the stock and pay the greater.

  • Saying the officer can cancel without a hearing.

    Suo moto cancellation feels like an administrative step.

    Fix: The proviso to Section 29(2) bars cancellation without an opportunity of being heard. Mention the show cause notice.

  • Confusing the cancellation application time with the revocation time.

    Both involve 30 or 90 day limits.

    Fix: REG-16 is within 30 days of the event. Revocation REG-21 is within 90 days of service of the order.

  • Applying the capital goods rule to all assets.

    Students treat stock and capital goods alike.

    Fix: Capital goods have the separate proviso: ITC reduced by prescribed percentage points, compared with tax on transaction value.

Worked examples

Example 1

Ravi Traders, a regular registered dealer in Pune, has not furnished returns for the continuous tax period prescribed under law. The proper officer plans to cancel its registration from a past date. Explain the legal position and the procedure.

Show the solution
  1. Ground: a registered person other than a composition taxpayer has not filed returns for the prescribed continuous tax period. This is Section 29(2)(c).
  2. The officer may cancel from any date, including a retrospective date.
  3. He must first issue a show cause notice in FORM GST REG-17. Ravi Traders must reply in FORM REG-18 within 7 working days of service.
  4. The officer cannot cancel without giving an opportunity of being heard.
  5. If Ravi files all pending returns and pays the tax, interest and late fee instead of replying, the officer shall drop the proceedings in FORM GST REG-20 (Rule 22(4) proviso).
  6. If not, he passes an order in FORM GST REG-19 within 30 days of the reply. Past dues stay payable under Section 29(3).

Answer: The officer may cancel under Section 29(2)(c) after a show cause notice and hearing, from a date he decides. Filing all pending returns with full tax, interest and late fee makes him drop the proceedings. Otherwise cancellation follows and past dues remain payable.

Example 2

Meena Enterprises discontinues its business on 1 March. On the day before cancellation, inputs in stock carry ITC of ₹40,000, and the output tax on those goods is ₹46,000. Compute the amount payable under Section 29(5) and state how to apply for cancellation.

Show the solution
  1. Meena's business is discontinued, so she may seek cancellation under Section 29(1)(a).
  2. She must file FORM GST REG-16 within 30 days of the event, with details of stock, liability and payments.
  3. Section 29(5) requires payment of the higher of ITC and output tax on the goods in stock.
  4. ITC = ₹40,000. Output tax = ₹46,000.
  5. Higher = ₹46,000.
  6. Payment is made by debit to the electronic credit or cash ledger.

Answer: Amount payable = ₹46,000, paid through the electronic credit or cash ledger. She applies in FORM GST REG-16 within 30 days of discontinuing the business.

Exam tips

  • In MCQs, test the number or form: 30 days for REG-16, 7 working days for reply, 90 days for revocation. Learn them as a set.
  • In written answers, always split grounds into Section 29(1) and 29(2) and give the sub-clause letter only when sure.
  • When a numerical gives both ITC and output tax, show both figures and then say 'whichever is higher'. This earns the step mark.
  • Close case answers with Section 29(3): dues continue after cancellation.
  • If the question mentions the officer acted on his own, add the hearing requirement and the revocation remedy.

Practice questions from Registration

Cancellation of Registration in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Cancellation of Registration: frequently asked questions

Can I cancel my GST registration voluntarily?

Yes. Under Section 29(1) a registered person can apply if the business is discontinued or transferred, its constitution has changed, or he is no longer liable to register. File FORM GST REG-16 within 30 days of the event, with stock and liability details.

Can the officer cancel registration with retrospective effect?

Yes, under Section 29(2) the officer may cancel from such date as he thinks fit, including a retrospective date. He must still give the person an opportunity of being heard.

What happens to input tax credit on cancellation?

Under Section 29(5) you must pay an amount equal to the ITC on inputs in stock, inputs in semi-finished or finished goods, and capital goods, or the output tax on them, whichever is higher. Capital goods follow a separate proviso.

Does cancellation remove pending tax liability?

No. Section 29(3) says cancellation does not affect liability for tax and other dues or obligations for any period before the cancellation date, whether determined before or after it.

Can a cancelled registration be restored?

If the officer cancelled it on his own motion, the person can apply for revocation in FORM GST REG-21 within 90 days of service of the order, extendable on sufficient cause. Returns due must be filed where cancellation was for non-filing.