GST Registration Cancellation and Refund Processing: Practical Challenges and Suggested Reforms
Background and Context
The Sales Tax Bar Association (Regd.), operating from its office at Vyapar Bhawan, Indraprashtha Estate, New Delhi, formally submitted a structured representation dated 22.04.2026 (Ref No. STBA/2026/02) to the Commissioner, State Tax / DGST, Department of Trade and Taxes, GNCT of Delhi. This submission followed a consultative meeting held on 15.04.2026 and addressed two pressing administrative concerns under the Goods and Services Tax framework — namely, the cancellation of GST registration on assessee-initiated applications, and the manner in which refund applications are currently being processed at the zonal level in Delhi.
The representation brings to light a range of systemic inefficiencies that are adversely affecting genuine assessees and practicing tax professionals alike, thereby undermining the broader objective of ease of doing business under GST.
Issue No. 1 — Ambiguity in ITC Threshold for Assignment of Proper Officers in Cancellation Cases
The Administrative Order in Question
The Department of Trade and Taxes had issued Order No. DTT-D011/33/2026-Policy-TT-/144 dated 02.04.2026, which laid down the framework for assigning Proper Officers posted in wards for handling GST registration cancellation applications. Under this order, a monetary threshold of Rs. 2.5 Crores has been prescribed with reference to Input Tax Credit availed and/or passed on by the assessee. Where the ITC availed and/or passed on exceeds this Rs. 2.5 Crore mark, prior approval from the concerned Zonal In-charge becomes mandatory before the ward officer can proceed with the cancellation.
The Core Ambiguity
A critical question that the order leaves unanswered is:
Whether the Rs. 2.5 Crore ITC threshold is to be applied on an annual basis or computed cumulatively from the date of the assessee's GST registration.
This distinction carries enormous practical consequences, particularly for assessees who registered under GST when the regime was introduced in FY 2017-18 and have been in compliance ever since.
Why Cumulative Interpretation Creates Hardship
If the threshold is interpreted on a cumulative basis, the following categories of assessees stand to be disproportionately affected:
Long-registered small businesses: An assessee with a modest annual turnover but registered since FY 2017-18 may have cumulatively availed ITC well in excess of Rs. 2.5 Crores over eight or more years — not due to any large-scale operations, but simply due to the passage of time. Such an assessee would then be pushed out of ward-level jurisdiction despite posing no complexity.
Genuine closure cases: Where an assessee seeks cancellation due to closure of business, death of the proprietor, or acute financial distress, routing the application through zonal approval adds procedural burden to an already difficult situation. These are not cases requiring heightened scrutiny — they are humanitarian or commercial exigencies warranting expeditious disposal.