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.
Key points
- 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).
The provisions
89(1)–(2)Liability of directors of private company
Statutory text
(1) Notwithstanding anything contained in the Companies Act, 2013 (18 of 2013), where any tax, interest or penalty due from a private company in respect of any supply of goods or services or both for any period cannot be recovered, then, every person who was a director of the private company during such period shall, jointly and severally, be liable for the payment of such tax, interest or penalty unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.
(2) Where a private company is converted into a public company and the tax, interest or penalty in respect of any supply of goods or services or both for any period during which such company was a private company cannot be recovered before such conversion, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax, interest or penalty in respect of such supply of goods or services or both of such private company:
Provided that nothing contained in this sub-section shall apply to any personal penalty imposed on such director.
*Enforced w.e.f. 1st July, 2017.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Can GST dues of a private company be recovered from its directors?
- Yes, under section 89 of the CGST Act, but only where they cannot be recovered from the company, and a director escapes liability by proving that non-recovery is not due to his gross neglect, misfeasance or breach of duty.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The condition "cannot be recovered" requires the department first to attempt recovery from the company; directors are not a first resort. The director must then be given notice and an opportunity to show absence of gross neglect, misfeasance or breach of duty. The section applies only to private companies, not to public companies or limited liability partnerships (which are treated as firms under section 94).