GST Registration Cannot Be Cancelled Retrospectively If SCN Did Not Propose It: Delhi High Court

Introduction

In Sarla Enterprises v. Commissioner of SGST Delhi & Anr. [W.P.(C) No. 19268 of 2025], the Delhi High Court dealt with an important issue relating to retrospective cancellation of GST registration. The case reinforces that tax authorities must act within the scope of the Show Cause Notice (SCN) issued to the taxpayer.

Background of the Case

The petitioner received an SCN proposing cancellation of GST registration due to non-filing of GST returns. The registration was suspended with effect from 05.11.2024.

However, the SCN did not propose cancellation of registration from any retrospective date. Despite this, the final cancellation order cancelled the GST registration retrospectively from 01.04.2020.

The petitioner challenged the order before the Delhi High Court and also undertook to file all pending GST returns. The petitioner stated that the non-compliance had occurred due to serious health issues.

Relevant GST Provisions

As per Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel GST registration from such date, including a retrospective date, as may be considered fit in prescribed circumstances.

However, the proviso to Section 29(2) clearly requires that registration cannot be cancelled without giving the taxpayer an opportunity of being heard.

Further, Rule 22 of the CGST Rules, 2017 provides the procedure for cancellation of registration. It requires issuance of notice in Form GST REG-17, giving the taxpayer an opportunity to explain why registration should not be cancelled.

High Court’s Decision

The Delhi High Court held that retrospective cancellation could not be ordered when the SCN itself did not propose retrospective cancellation.

The Court observed that the final order travelled beyond the scope of the SCN. Since the taxpayer was not put to notice regarding retrospective cancellation from 01.04.2020, such an order could not be sustained.

Accordingly, the Court set aside the cancellation order and accepted the petitioner’s undertaking to file pending and future GST returns.

Key Takeaways for Taxpayers

Business owners should note the following:

• A GST cancellation order must remain within the scope of the SCN.
• If retrospective cancellation is proposed, it should be specifically mentioned in the SCN.
• Authorities cannot impose a more severe consequence in the final order without giving proper notice.
• Taxpayers should respond to GST notices within time and maintain proper compliance records.
• Pending GST returns should be filed promptly to avoid cancellation proceedings.

Conclusion

This decision is important for taxpayers facing GST registration cancellation proceedings. While non-filing of returns can invite action under GST law, cancellation with retrospective effect must follow due process and cannot be imposed without proper notice.

For expert guidance on this topic, contact your tax professional today.