Introduction
GST cancellation over non-filing is a common issue hurting businesses. In a recent ruling (2025 TAXSCAN (HC) 1034), the Madras High Court set aside a cancellation order and gave the taxpayer a chance to pay dues, but barred use of unutilised ITC. Let’s break this down simply.
Background: Why GST Registrations Get Cancelled
Under Section 29 of the CGST Act, 2017, officers can cancel GST registration if:
- Returns aren’t filed for a continuous period (e.g., 6 months for composition taxpayers, 3 months for regular taxpayers)
- Contravention of Act provisions
- Voluntary cancellation by the taxpayer
Once cancelled, taxpayers lose the right to collect tax and claim ITC.
Key Highlights of Madras HC Decision
- Case Citation: 2025 TAXSCAN (HC) 1034
- Issue: Petitioner’s GST was cancelled due to prolonged non-filing.
- Petitioner’s Stand: Willing to pay all pending dues but sought permission to adjust from unutilised Input Tax Credit.
- Court’s Finding:
- Cancellation order was premature.
- Taxpayer must pay dues in cash; no adjustment from lapsed ITC.
- Restoration allowed only after payment.
Reference: CGST Act, 2017 – Section 29
Practical Impact for Taxpayers
✔️ Relief:
Courts may grant a chance to regularise compliance if you show willingness to pay.
❌ No ITC Benefit:
Once cancelled, you can’t adjust old unutilised ITC towards pending tax.
How to Avoid GST Cancellation Over Non-Filing
- File returns on time — even NIL returns.
- Use reminders or compliance tools.
- If unable to pay tax, at least file returns to avoid cancellation.
- If cancelled, file an appeal or writ promptly.
Expert Tip: Be Proactive
As per tax consultants, keeping returns up to date is cheaper than restoration battles later. Penalties, interest, and loss of ITC can cost much more.
Quick Comparison: Before vs After Restoration
| Aspect | Before Restoration | After Restoration |
|---|---|---|
| Right to collect tax | Lost | Restored |
| File returns | Not possible | Possible |
| Use old ITC | Not allowed | Not allowed |
| Penalty/Interest | Accrues | Must be paid |
Key Takeaway
This case shows courts may help genuine taxpayers, but don’t expect revival of lapsed ITC. GST compliance must stay current to avoid harsh consequences.
FAQs on GST Cancellation Over Non-Filing
Q1. Can I use ITC to pay pending dues after cancellation?
No. Courts have consistently denied using old ITC once registration is cancelled.
Q2. How can I restore my cancelled GST number?
You must pay pending taxes, penalties, and apply for revocation within the prescribed time.
Q3. Can I approach High Court if revocation is rejected?
Yes, but show genuine reasons and readiness to comply.
Summary
Madras HC sets aside GST cancellation for non-filing, giving a taxpayer time to clear dues but blocks use of old ITC. Timely filing and payment help avoid costly restoration. Read key steps to stay compliant.