Right to Livelihood vs. GST Regulations: A Legal Perspective

The cancellation of GST (Goods and Services Tax) registration due to non-compliance can severely impact small business owners and entrepreneurs. Often, these cancellations happen because of the failure to file tax returns on time. This issue highlights the conflict between following strict tax regulations and protecting an individual's right to earn a livelihood. When GST registration is cancelled, it can cripple a business's operations, preventing legal trade and affecting the owner's ability to sustain their livelihood. This situation raises important questions about the fairness and flexibility of tax laws, especially when delays or non-compliance result from genuine oversight or unavoidable hardships. Balancing the need for regulatory compliance with the necessity to safeguard individuals' economic rights is a critical challenge for policymakers and the judiciary.

The case of Jones Diraviam vs. Deputy Commissioner of GST (W.P.(MD) No. 6580 of 2024) highlights a significant legal issue concerning the cancellation of GST registration and its impact on an individual's right to livelihood.

Jones Diraviam, the petitioner, is a supply contractor whose GST registration was cancelled due to the non-filing of returns. The petitioner filed an appeal with a delay of 260 days, seeking the condonation of this delay and reinstatement of his GST registration

Petitioner's Argument:

• The petitioner was unaware of the notice issued for non-filing of returns due to inadvertent oversight.

• The cancellation of GST registration has severely affected his business and livelihood.

• Citing the pandemic and his health issues as reasons for the delay, the petitioner invoked the court's jurisdiction under Article 226 of the Constitution of India.

Respondents' Argument:

• The petitioner did not file a reply to the notice and failed to appeal within the prescribed time limit.

• The GST Act does not allow the condonation of delays beyond a certain period.

Court's Consideration:

The court referenced similar cases, including a Division Bench of the Bombay High Court and the High Court of Uttarakhand, where it was held that the cancellation of GST registration could affect an individual's right to livelihood under Articles 19(1)(g) and 21 of the Constitution.

Legal Standpoints:

1. The court emphasized that the right to carry on trade and business is protected under Article 19(1)(g) of the Constitution.

2. Denying GST registration impacts the petitioner's ability to earn a living, thus violating Article 21.

3. While the GST Act has stringent provisions regarding the filing of appeals, the court noted that these should not deny an individual's constitutional rights.

4. The court asserted that the statutory limitations should not result in undue hardship or denial of justice.

Conclusion

The Madras High Court allowed the writ petition, setting aside the impugned order of cancellation. The case was remitted back to the respondents for fresh consideration, emphasizing that the petitioner's right to livelihood should not be compromised due to procedural delays.

Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.