Section 29(2): The Grounds for Cancellation by an Officer

Section 29 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Cancellation is the most consequential thing that can happen to a registration, and it is done on enumerated grounds — not at large.

Section 29(2) lets the proper officer cancel registration, from such date including any retrospective date as he may deem fit, on five grounds: (a) contravention of prescribed provisions; (b) a composition person not furnishing returns for three consecutive tax periods; (c) any other registered person not furnishing returns for a continuous period of six months — now read with the prescribed period; (d) a voluntary registrant not commencing business within six months from registration; (e) registration obtained by fraud, wilful misstatement or suppression of facts. The proviso requires an opportunity of being heard before cancellation.

The five statutory grounds

(a) Contravention of such provisions as may be prescribed. The prescribed provisions are in Rule 21, discussed below.

(b) Composition taxpayer, three consecutive tax periods. Failure to furnish returns for three consecutive tax periods. For a composition dealer filing CMP-08 quarterly, that is three quarters.

(c) Any other registered person, continuous period. Failure to furnish returns for a continuous period of six months — with the sub-section as amended providing for such continuous period as may be prescribed for specified classes.

(d) Voluntary registration, no business within six months. Applies only to a person registered under s.25(3).

(e) Fraud, wilful misstatement or suppression of facts. The gravest ground, and the one that supports retrospective cancellation.

Rule 21: the prescribed contraventions

Registration is liable to be cancelled where the person:

(a) does not conduct any business from the declared place of business;

(b) issues invoice or bill without supply of goods or services or both in violation of the Act or rules;

(c) violates s.171 — anti-profiteering — or the rules made thereunder;

(d) violates Rule 10A — bank account details; Rule 10A →

(e) avails input tax credit in violation of s.16 or the rules;

(f) furnishes details of outward supplies in GSTR-1 in excess of the outward supplies declared in GSTR-3B for one or more tax periods;

(g) violates Rule 86B — the 99% credit utilisation cap;

(h) being a person required to file returns under s.39(1) for each month or quarter, fails to file returns for a continuous period of six months or two quarters, as the case may be;

(i) being a person who has taken voluntary registration under s.25(3), has not commenced business within six months from registration.

Grounds (a), (b) and (e) are the enforcement grounds; the rest are compliance grounds.

The hearing proviso

"Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard."

This is the most litigated aspect of cancellation, and the case law is consistent: a cancellation order passed without a hearing, or on a show cause notice that does not disclose the grounds, is liable to be set aside.

Rule 22(1): where the proper officer has reasons to believe that the registration is liable to be cancelled, he shall issue a notice in FORM GST REG-17, requiring the person to show cause within seven working days.

Rule 22(2): the reply is furnished in FORM GST REG-18 within that period.

Rule 22(3): where the reply is found satisfactory, the officer drops the proceedings and passes an order in FORM GST REG-20.

Rule 22(3) also provides that where a person has filed an application for cancellation, the officer shall issue an order in FORM GST REG-19 within thirty days.

The recurring defect is a REG-17 that simply cites a rule number without stating the facts. A notice that does not tell the person what case they have to meet does not afford a reasonable opportunity, and that is the primary ground on which cancellations are set aside in writ proceedings. Writ petitions against GST orders →

Retrospective cancellation

Section 29(2) permits cancellation "from such date, including any retrospective date, as he may deem fit".

Retrospective cancellation has an effect the section does not spell out: every invoice issued by the person after the retrospective date was issued by an unregistered person, and every customer's credit on those invoices fails.

Courts have therefore held that retrospective cancellation cannot be mechanical. The officer must apply his mind to why the retrospective date is appropriate, and the show cause notice must put the person on notice that retrospective cancellation is proposed — a notice proposing cancellation simpliciter does not support an order cancelling from an earlier date.

What survives cancellation

Section 29(3): cancellation shall not affect the liability to pay tax and other dues, or to discharge any obligation, for any period prior to the date of cancellation, whether or not such dues are determined before or after the date of cancellation.

Section 29(5): on cancellation, the person must pay an amount equivalent to the credit on inputs in stock, inputs in semi-finished and finished goods, and capital goods, or the output tax payable on such goods, whichever is higher, computed under Rule 44.

GSTR-10 final return is due within three months of the date of cancellation or the date of the cancellation order, whichever is later.

Key takeaways

• Five statutory grounds in s.29(2), plus nine prescribed contraventions in Rule 21.
• Cancellation may be retrospective, but not mechanically — the notice must propose it.
• The hearing proviso is mandatory, and a defective REG-17 is the usual ground for setting aside.
• REG-17 allows seven working days; the reply is REG-18; dropping is REG-20; cancellation is REG-19.
• s.29(3) preserves all pre-cancellation liabilities.
• s.29(5) requires payment of the higher of the credit reversal and the output tax on stock and capital goods.

Read next

• Rule 21A: Suspension of Registration
• GST Registration Cancelled by the Officer: REG-17 and REG-19
• Section 30: Revocation Application and Timelines
• How to File the Final Return GSTR-10

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Registration under GST (November 2025).