Under Indian Tax Laws, particularly the VAT (Value Added Tax) regime which was implemented by individual states before the introduction of GST, the cancellation of a VAT dealer’s registration was a critical provision aimed at ensuring compliance and preventing misuse of the registration mechanism. A VAT registration could be cancelled either voluntarily by the dealer (in cases such as closure of business, turnover falling below threshold, or shifting to a composition scheme) or by the authority suo moto due to violations such as non-filing of returns, fraud, or furnishing false information at the time of registration.
As per the State VAT Acts, typically under Section 22 to 24 (the section numbers may vary slightly depending on the state), the Commissioner or prescribed authority has the power to cancel the certificate of registration of a dealer. For instance, under Section 22(6) of the Andhra Pradesh VAT Act, 2005, it states: “The authority may cancel the registration of a dealer if the dealer discontinues business, transfers the business, or fails to comply with the conditions of registration or the provisions of the Act.” The cancellation may take effect from a date specified in the cancellation order, and the dealer is required to surrender the certificate within the stipulated time.
Once cancelled, the dealer is not permitted to collect tax or claim input tax credit. However, the law also allows for an appeal process if the dealer feels the cancellation was unjustified. The cancellation must be communicated in writing and is typically uploaded on the department’s portal for transparency.
Mnemonic to Remember – “C.L.O.S.E.”
- C – Ceased Business
- L – Low Turnover
- O – Offence (Fraud/False info)
- S – Suo moto Cancellation by Authority
- E – Eligibility Lost (e.g., moved to Composition Scheme)
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