Background:
Under the existing framework, Rule 21A provides for suspension of registration either by the proper officer on initiation of cancellation proceedings or by the common portal where significant anomalies are noticed on comparison of returns, with an intimation in FORM GST REG-31. Rule 22 provides for a show cause notice in FORM GST REG-17, reply in FORM GST REG-18 within seven working days, and an order of cancellation in FORM GST REG-19 or dropping of proceedings in FORM GST REG-20 within 30 days. Revocation of cancellation is governed by Rule 23, under which an application in FORM GST REG-21 is to be filed within 90 days (extendable up to 180 days) and decided by the proper officer. The bulk of cancellations across the country arise from non-filing of returns for six months (or two tax periods under QRMP) and non-furnishing of bank account details under Rule 10A. These cases, though mechanical in nature, were processed manually, resulting in delays both in cancellation and in restoration of registration after the taxpayer regularised the default.
The 57th GST Council (08.10.2026) recommended amendment in Rules 21A and 22 and insertion of Rule 23A in the CGST Rules, 2017, to provide a mechanism of system-based cancellation and revocation of registration based on non-compliance, and subsequent compliance, with the defaults of non-filing of returns or non-furnishing of bank account details within a specified period. The Council also recommended corresponding amendments to Section 29 of the CGST Act.
What the Notification provides:
Now, the CBIC vide Notification No. 05/2026-Central Tax dated 26.10.2026 has, with effect from 01.04.2027, substituted Rule 21A and Rule 22 and inserted new Rule 23A in the CGST Rules, 2017. The key changes are:
- Rule 21A(1) – Suspension by officer: Where the proper officer has reasons to believe that registration is liable to be cancelled under Section 29(3), he may, on initiation of cancellation proceedings, suspend the registration from a date determined by him till completion of proceedings under Rule 22.
- Rule 21A(2) – Suspension by the system: The common portal may suspend the registration where the registered person (a) under composition has not filed the annual return beyond three months from the due date; (b) has not filed monthly returns for a continuous period of six months; (c) has not filed quarterly returns for two tax periods; or (d) violates Rule 10A. An intimation in substituted FORM GST REG-31 will require the person to furnish the pending returns or comply with Rule 10A within 30 days.
- Rule 21A(3) – Effect of suspension: A person whose registration is suspended shall not make any taxable supply during the suspension (the Explanation clarifies that he shall not issue a tax invoice and shall not charge tax) and is not required to furnish returns under Section 39 during that period.
- Rule 21A(4) to (7) – Revocation of suspension: Suspension by the system is deemed revoked on furnishing all pending returns or complying with Rule 10A within 30 days of intimation in REG-31; suspension by the officer is deemed revoked on completion of proceedings under Rule 22. Revocation is effective from the date on which the suspension came into effect, and the provisions of Section 31(3)(a) (revised invoices) and Section 40 (first return) apply to supplies made during the suspension period.
- Rule 22(1) to (4) – Cancellation by officer: Show cause notice in substituted FORM GST REG-17 with seven working days to reply in FORM GST REG-18; if satisfied, order dropping proceedings in FORM GST REG-20; if not satisfied, order of cancellation in FORM GST REG-19 within 30 days of receipt of the reply or of the due date for reply, directing payment of arrears including the amount payable under Section 29.
- Rule 22(5) – Deemed cancellation by the system: Where a person suspended by the system under Rule 21A(2) does not furnish all pending returns or comply with Rule 10A within 30 days of suspension, the registration is deemed cancelled electronically by the common portal and intimated in FORM GST REG-38.
- Rule 22(6): Where the officer later has reasons to believe that the effective date of cancellation should be an earlier date, the procedure under Rule 20(14) to (20) (FORMS GST REG-34 to REG-37) applies mutatis mutandis.
- Rule 23A – Revocation by the system: A person whose registration is deemed cancelled under Rule 22(5) may, within 180 days of cancellation, apply for revocation in FORM GST REG-21. No application can be filed unless the pending returns are furnished and tax, interest, penalty and late fee thereon are paid, or the bank account details under Rule 10A are furnished, as the case may be. On such compliance, the application is deemed approved, the cancellation is revoked by the common portal and an order in FORM GST REG-22 (substituted) is communicated. All returns due from the date of cancellation to the date of revocation must be filed within 30 days of the revocation order.
Consequential amendments have been made to FORMS GST REG-17, REG-18, REG-19, REG-20, REG-22 and REG-31, all effective 01.04.2027.
Effective date:
The substituted Rules 21A and 22 and new Rule 23A come into force on 1st April, 2027, by which time the corresponding amendments to Section 29 of the CGST Act are expected to be enacted and made effective. Until then, the existing procedure continues. Businesses should note that under the new regime the common portal will cancel the registration automatically within 30 days of suspension if the defaults are not cured, and restoration will likewise be automatic on compliance within 180 days.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/CBIC-NN-05-2026–Central-Tax.pdf
