Section 29 – Cancellation of Registration
Section 29 of CGST Act, 2017 – Cancellation of Registration
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Bare Act – Section 29
Section 29(1):
The proper officer may cancel the registration,
either on his own motion or on an application filed by the registered person,
in such circumstances and in such manner as may be prescribed.
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) the business has been discontinued, transferred fully, or otherwise disposed of
- (b) there is any change in constitution of business
- (c) the taxable person is no longer liable to be registered
- (d) registered person has contravened provisions of the Act or Rules
- (e) person paying tax under composition scheme has not furnished returns for three consecutive tax periods
- (f) any registered person (other than composition) has not furnished returns for a continuous period as prescribed
- (g) registration has been obtained by fraud, wilful misstatement or suppression of facts
2. Objective of Section 29
Section 29 empowers the department to remove inactive, non-compliant or fraudulent registrations and allows genuine taxpayers to exit GST lawfully when liability ceases.
3. Cancellation on Application by Taxpayer
A registered person may apply for cancellation when:
- Business is closed or discontinued
- Turnover falls below threshold limit
- Business is transferred or amalgamated
- Change in constitution (proprietor to company, etc.)
Relevant Rule:
4. Cancellation by Proper Officer (Suo Motu)
The proper officer may cancel registration on his own motion if:
- Returns are not filed for prescribed period
- Registration obtained fraudulently
- Business found to be non-existent
- Serious violation of GST provisions
Before cancellation:
- Show Cause Notice must be issued
- Opportunity of being heard must be provided
5. Retrospective Cancellation – Section 29(2)
The officer may cancel registration from a retrospective date.
However:
- Retrospective cancellation must be reasoned
- Cannot be arbitrary or mechanical
- Courts have repeatedly held retrospective cancellation should be used sparingly
Improper retrospective cancellation can be challenged by writ petition or appeal.
6. Effect of Cancellation – Section 29(3)
Cancellation of registration does not:
- Relieve the person from liability to pay tax
- Waive interest, penalty or dues
All liabilities prior to cancellation remain recoverable.
7. Input Tax Credit on Cancellation – Section 29(5)
A registered person whose registration is cancelled must pay:
- ITC on stock of inputs
- Inputs contained in semi-finished goods
- Finished goods
- Capital goods (reduced by prescribed percentage)
Payment shall be:
- Equivalent to ITC availed, or
- Output tax payable, whichever is higher
Relevant Rule:
8. Cancellation vs Suspension
Suspension is temporary, whereas cancellation is permanent unless revoked.
Suspension is governed by:
9. Common Practical Issues
- Cancellation due to non-filing of returns
- Retrospective cancellation without reasons
- Blocking of e-way bill and portal access
- Denial of ITC to recipients
10. Related Provisions
- Section 28 – Amendment of registration
- Section 30 – Revocation of cancellation
- Section 73 – Determination of tax (non-fraud cases)
11. Important Judicial View (Conceptual)
Cancellation of registration, especially with retrospective effect, must follow principles of natural justice and cannot be used as a punitive shortcut.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position till date. Future amendments or judicial pronouncements may require revision.
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