Answer

1. F

   Facts

   Yes. Under Sec 29(5), when registration is cancelled you pay an amount equal to the ITC on inputs held in stock, semi-finished and finished goods, or the output tax on them, whichever is higher. This is reported in REG-16 and finally settled in GSTR-10.

2. P

   Provisions and law

   • Sec 29(5), CGST Act 2017On cancellation you pay the higher of ITC on stock and capital goods held, or output tax on them
   • Rule 20, CGST Rules 2017Application in REG-16 within 30 days of the event, with details of stock, liability and payment
   • Sec 45, CGST Act 2017Final return GSTR-10 within 3 months of the cancellation date or the cancellation order, whichever is later
3. A

   Analysis

   The law stops you keeping credit on goods that will now be sold outside the GST net. Say your stock cost ₹3,00,000 and you took 18 percent ITC of ₹54,000, while its market value is ₹2,80,000, so output tax would be ₹50,400. You pay the higher figure, ₹54,000. You can pay from the electronic credit ledger if balance is available, or in cash. If you did not take ITC on part of the stock, for example goods bought from unregistered dealers, that part needs no reversal on the ITC basis.

4. C

   Conclusion

   1. 1Take a physical count of stock on the closure date and value it at cost and at market value.
   2. 2List the ITC actually taken on that stock from purchase invoices.
   3. 3Compute both figures and pick the higher one.
   4. 4Enter the stock and tax in REG-16 and pay it through GSTR-10.

Leaving stock as nil in REG-16 when stock exists is a common reason for notices after closure.

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.