Introduction
When GST registration is cancelled, the registered person loses the ability to claim ITC. But what happens if purchases were made after the cancellation date? The question arises: Can ITC be claimed on purchases made after cancellation?
This guide explains the legal position, the impact on ITC, and the remedies available.
Legal Framework: Section 29 of the CGST Act, 2017
Effect of Cancellation
Cancellation of GST registration terminates the registration. After cancellation, the person cannot make taxable supplies, cannot issue tax invoices, and cannot claim ITC.
ITC Reversal Under Section 29(5)
Section 29(5) provides that where registration is cancelled, the person must reverse the ITC on stock held or capital goods. However, the Andhra Pradesh High Court has held that ITC reversal under Section 29(5) cannot survive once a cancellation is set aside.
What Happens After Revocation?
ITC Availability After Revocation
Where the cancellation is revoked, ITC becomes available again. However, the ITC must be within the time limit under Section 16(4).
ITC on Purchases During Cancellation
ITC on purchases made during the cancellation period is generally not available. However, where the cancellation is set aside and the registration is restored, ITC on eligible invoices may become available.
Judicial Precedents
Andhra Pradesh High Court
The Andhra Pradesh High Court has held that Section 29(5) applies only when a valid cancellation exists. Once the cancellation is annulled, the basis for ITC reversal disappears.
Various High Courts
High Courts have held that ITC cannot be denied to a purchasing dealer solely because the supplier's registration was cancelled retrospectively, if the transaction was genuine.
Remedies for ITC After Cancellation
- Apply for Revocation: Apply for revocation in FORM GST REG-21.
- File Pending Returns: File all pending returns for the cancellation period.
- Reconcile ITC: Reconcile GSTR-2B with purchase records.
- Claim ITC After Revocation: Claim ITC in the first GSTR-3B after revocation.
- Seek Judicial Intervention: Where the cancellation is unjustified, seek judicial intervention.
Best Practices
- Avoid making purchases during the cancellation period.
- Apply for revocation promptly.
- Maintain records of all purchases.
- Reconcile ITC after revocation.
- Seek professional assistance for ITC claims after cancellation.
Conclusion
ITC on purchases made after GST registration cancellation is generally not available. However, where the cancellation is revoked or set aside, ITC on eligible invoices may become available. Timely action and professional assistance are essential.
Facing ITC issues after GST cancellation? Anuj Desai & Associates provides expert assistance with revocation and ITC claims. Contact us today.
Contact us:
- Email: office@anujdesaiassociates.com
- Phone: 9619456656
- Website: https://anujdesaiassociates.com
- LinkedIn: linkedin.com/in/ca-anuj-desai-122547230