In a recent legal development, the Delhi High Court addressed the issue of retrospective cancellation of GST registration in the case of Veenu Bajaj, proprietor of M/s Addvertex, versus the Commissioner of CGST and another. The court examined the cancellation of Bajaj's GST registration, which was initially retroactively annulled from October 31, 2017, based on the assertion that the business was non-existent. This decision was made following a show-cause notice issued in October 2024, which did not specify the intention for retrospective action. Despite Bajaj's submission of a revocation application with supporting documentation, the request was denied in April 2025.

The core issue revolved around whether such retrospective cancellation was lawful, given the absence of a clear proposal for retrospective action in the show-cause notice and the lack of detailed reasoning in the cancellation order. The court acknowledged that while the law permits retrospective cancellation under Section 29(2) of the CGST Act, this authority must be exercised judiciously and accompanied by explicit reasoning. The court emphasized the significant impact of retrospective cancellation, particularly the denial of Input Tax Credit (ITC) to buyers, necessitating prior notice to the taxpayer regarding any intended retrospective effect.

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Consequently, the court modified the effective cancellation date to align with the issuance date of the show-cause notice. It also granted the department the opportunity to issue a new notice with appropriate justification if retrospective cancellation remained the objective. This decision underscores the necessity for transparency and detailed reasoning in tax-related actions affecting businesses.