CGST Act · Chapter XVI
Liability to Pay in Certain Cases
s. 85Liability in case of transfer of business
Section 85 prevents a business from shedding its GST dues by changing hands. Whoever transfers the business, and whoever takes it, answer together for what was due up to the date of transfer.
- Under section 85(1) of the CGST Act, 2017, where a taxable person transfers its business, wholly or partly, by sale, gift, lease, leave and licence, hire or otherwise, the transferor and the transferee are jointly and severally liable — wholly, or to the extent of the transfer — for tax, interest and penalty due from the transferor up to the time of transfer, whether determined before or after.
- The transferee carrying on the business is liable for tax on its own supplies from the date of transfer, and, if already registered, must apply for amendment of its registration within the prescribed time (section 85(2)).
s. 86Liability of agent and principal
Section 86 makes an agent who buys or sells goods for a principal answerable, along with the principal, for the GST on those goods.
- Under section 86 of the CGST Act, 2017, where an agent supplies or receives taxable goods on behalf of a principal, the agent and the principal are jointly and severally liable to pay the tax on those goods.
- The section concerns goods only; supply of goods by a principal to an agent is itself a deemed supply under Schedule I, para 3.
s. 87Liability in case of amalgamation or merger
Section 87 deals with the gap between the appointed date of an amalgamation and the date of the court or Tribunal order. Until the order, the companies remain separate for GST, and supplies between them are taxable.
- Under section 87(1) of the CGST Act, 2017, where an amalgamation or merger order takes effect from a date earlier than the order and the companies supplied or received goods or services to or from each other in between, those transactions are included in their respective turnovers and taxed.
- Under section 87(2) the companies are treated as distinct up to the date of the order, and their registrations are cancelled only from that date.
s. 88Liability in case of company in liquidation
Section 88 brings the GST department into a winding up. The liquidator must tell the department of the appointment, and the department must say what it claims. For a private company, directors may have to pay dues that cannot be recovered from the company.
- Under section 88(1) of the CGST Act, 2017 a liquidator appointed in a winding up must intimate the Commissioner within thirty days.
- The Commissioner must notify the liquidator, within three months of the intimation, of the amount sufficient to provide for the company's dues (section 88(2)).
- When a private company is wound up and its dues cannot be recovered, every director at the relevant time is jointly and severally liable, unless he proves that non-recovery is not due to his gross neglect, misfeasance or breach of duty (section 88(3)).
s. 89Liability of directors of private company
Section 89 lifts the corporate veil for private companies. If the company's GST dues cannot be recovered, the directors of the relevant period must pay — unless each shows that the failure is not due to his own gross neglect, misfeasance or breach of duty.
- Under section 89(1) of the CGST Act, 2017, notwithstanding the Companies Act, 2013, where tax, interest or penalty due from a private company cannot be recovered, every person who was a director during the period is jointly and severally liable, unless he proves that non-recovery cannot be attributed to his gross neglect, misfeasance or breach of duty.
- The liability continues where the private company converts into a public company, for dues of the private-company period that could not be recovered before conversion — but not for personal penalties imposed on a director (section 89(2) and proviso).
s. 90Liability of partners of firm
Section 90 makes every partner personally answerable, with the firm, for the firm's GST dues. A retiring partner's liability runs up to retirement — but only if the department is told within a month.
- Under section 90 of the CGST Act, 2017, notwithstanding any contract or other law, a firm and each of its partners are jointly and severally liable for the firm's tax, interest and penalty.
- A retiring partner, or the firm, must intimate the retirement to the Commissioner; the partner is liable for dues up to the date of retirement, whether determined then or later (first proviso).
- If intimation is not given within one month of retirement, the partner's liability continues until the intimation is received (second proviso).
s. 91Liability of guardians trustees
Section 91 places the GST liability of a business run for a minor or incapacitated person on the person actually running it.
- Under section 91 of the CGST Act, 2017, where a business is carried on by a guardian, trustee or agent of a minor or other incapacitated person on his behalf and for his benefit, the tax, interest or penalty is levied on and recoverable from the guardian, trustee or agent, as it would be from the minor or incapacitated person.
s. 92Liability of Court of Wards
Section 92 ensures that a business does not escape GST while its estate is managed by a court-appointed authority; the authority pays as the owner would.
- Under section 92 of the CGST Act, 2017, where the estate of a taxable person owning a business is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager appointed by or under a court order, the tax, interest or penalty is levied on and recoverable from that authority to the same extent as from the taxable person.
s. 93Special provisions on liability
Section 93 says who pays when the person liable is no longer there in the same form: legal representatives on death, members on partition, partners on dissolution, and beneficiaries when a guardianship or trust ends.
- Under section 93(1) of the CGST Act, 2017, on the death of a person liable, a legal representative or other person continuing the business is liable for the dues; if the business is discontinued, the legal representative is liable out of the estate, to the extent the estate can meet it.
- On partition of an HUF or AOP, the members each member or group of members is jointly and severally liable for dues up to the partition (section 93(2)).
- On dissolution of a firm, every partner is jointly and severally liable for dues up to dissolution (section 93(3)); on termination of a guardianship or trust, the ward or beneficiary is liable (section 93(4)).
- Each rule is "save as otherwise provided in the Insolvency and Bankruptcy Code, 2016".
s. 94Liability in other cases
Section 94 fills the remaining gaps: a firm, association or family that stops business, changes its constitution, dissolves or partitions is assessed as if nothing had changed, and its members answer for the dues.
- Under section 94(1) of the CGST Act, 2017, where a firm, AOP or HUF discontinues business, its dues up to discontinuance are determined as if it had continued, and every partner or member at the time is jointly and severally liable.
- On a change in the constitution of a firm or AOP, partners or members before and after the change are jointly and severally liable for dues up to the change (section 94(2)).
- The same applies on dissolution of a firm or AOP or partition of an HUF (section 94(3)).
- A limited liability partnership is treated as a firm for Chapter XVI, and "court" means the District Court, High Court or Supreme Court (Explanation).