LIABILITY TO PAY IN CERTAIN CASES - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

12. LIABILITY TO PAY IN CERTAIN CASES (I) To recover the dues and to initiate the recovery procedure, it is a must to have clarity as to from whom the dues of tax is to be recovered. The GST law has inbuilt provisions which impart clarity in this regard to administer and implement GST law and to reduce litigation on this count. (II) Liability in case of transfer of business before the date of transfer: Section 85(1) of the CGST Act, 2017 provides that if a taxpayer transfers his business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner then the taxpayer and the person to whom the business is transferred shall, jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxpayer till the time of such transfer, whether or not such dues have been determined before such transfer. (III) Exclusive Liability of Transferee of Business from the date of transfer: The provisions of Section 85(2) of the CGST Act, 2017 stipulate that if the transferee of a business carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods and/or services effected by him from the date of such transfer. (IV) Liability of agent and principal: As per Section 86 of the CGST Act, 2017, if an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall be jointly and severally liable to pay the tax on such goods. (V) Liability in case of amalgamation or merger of companies : Section 87(1) of the CGST Act, 2017, provides that when two or more companies are amalgamated or merged in pursuance of an order of Court or Tribunal and effective from an earlier date and any two or more of such companies have supplied or received any goods and/or services to or from each other during the period commencing from the effective date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly. (VI) As per Section 87(2) of the CGST Act, 2017, companies amalgamating or merging are to be treated as distinct companies for the purpose of GST for period upto the date of Order of Court or Tribunal and the registration certificates of these companies shall be cancelled with effect from the date of the said order. (VII) Liability in case of company in liquidation : (i) Section 88 of the CGST Act, 2017 contains provision for determination of liability in case where the company is under liquidation. When any company is being wound up, whether under the orders of a court or Tribunal or otherwise, the receiver (liquidator) of any assets of a company shall give intimation of his appointment to the Commissioner within thirty days after his appointment. The Pr. Commissioner/Commissioner has to notify the Liquidator of the amount sufficient to provide for any tax, interest or penalty in FORM GST DRC-24 , within 3 months. (ii) The Liability to pay dues of tax, interest or penalty lies on every person who was a Director of Private Company in case of Winding Up of Private Companies, unless he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect or breach of duty on his part in relation to the affairs of the company. (iii) Provision of Companies Act, 2013 not applicable if it is in conflict with the above provision contained in CGST Act, 2017. (VIII) Liability of Directors of Private Company : Section 89(1) of the CGST Act, 2017 provides that if any amount of 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 the said amount 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. This provision shall not to apply in case of conversion from Private Company to public Company but applies for recovery of personal penalty imposed on Director. (IX) Liability of partners of firm to pay tax : (i) Section 90 of the CGST Act, 2017 provides for determination of liability of firms or partners in case of partnership firm. The Firm and Partners of Firms are liable to pay any tax, interest or penalty, Jointly and severally. (ii) The liability of Retired Partner shall be only upto the date of his retirement or intimation of date of Retirement to the Commissioner, whether the liability is determined or not, on that date. In case of failure to intimate the date of retirement within one month, the liability of Retired Partner will continue. (X) Liability of guardians, trustees, etc. : Section 91 of the CGST Act, 2017 provides that if the business is carried on by any guardian, trustee or agent of a minor or other incapacitated person on behalf of a minor or incapacitated person, the tax, interest or penalty payable shall be recoverable from such guardian, trustee or agent to the extent determined and recoverable from any such minor or incapacitated person. (XI) Liability of Court of Wards, etc .: Section 92 of the CGST Act, 2017 provides that if the estate or any portion of the estate of a taxpayer is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager appointed by a court, the tax, interest or penalty shall be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver or manager. (XII) Section 93 of the CGST Act, 2017 contains special provision regarding liability to pay tax, interest or penalty in certain specific situations. (i) Liability to pay when person liable to pay dies (a) If a business carried on by the person is continued after his death by his legal representative or any other person, then the liability to pay tax, interest or penalty will be on such legal representative or other person. (b) If the business carried on by the person is discontinued before or after his death then his legal representative shall be liable to pay the tax, interest or penalty due from such person, whether determined before or after his death, from the estate of the deceased to the extent to which the estate is capable of meeting the charge. (ii) If the taxpayer liable to pay dues of tax, interest or penalty is Hindu Undivided Family (HUF) or an Association of Persons and the property of the HUF or the association of persons is partitioned amongst the various members or groups of members, then each member or group of members shall, jointly and severally, be liable to pay such dues up to the time of the partition, whether such dues were determined before partition or after the partition. (Section 93(2) of the CGST Act, 2017) (iii) It the taxpayer liable to pay dues of tax, interest or penalty is a firm and the firm is dissolved then the partners of the firm shall, jointly and severally, be liable to pay such dues from the firm up to the time of dissolution, whether determined before the dissolution or after dissolution. (Section 93(3) of the CGST Act, 2017). (iv) If the taxpayer liable to the pay dues of tax, interest or penalty is a guardian of a ward or trustee, on whose behalf the business is carried on by the guardian or is a trustee who carries on the business under a trust for a beneficiary, and if the guardianship or trust is terminated, then the ward or the beneficiary shall be liable to pay such dues from the taxpayer upto the time of the termination of the guardianship or trust, whether such dues are determined before the termination of guardianship or trust or thereafter. (Ref: Section 93(4) of the CGST Act, 2017). (XIII) Liability in other cases : (i) Section 94 of the CGST Act, 2017 provides that if the taxpayer liable to pay is a firm or an association of persons or a HUF and the business is discontinued then the tax, interest or penalty payable by such firm, association or family up to the date of such discontinuance may be determined as if no such discontinuance had taken place and every person who was a partner of such firm, or a member of such association or family, shall, jointly and severally, be liable for the payment of the said dues, whether such dues are determined prior to or after such discontinuance. (ii) When there is change in constitution of a firm or an association of persons, the partners of the firm or member of association shall, jointly and severally, be liable to pay tax, interest or penalty due from such firm or association for any period before its reconstitution. (Section 94(2) of the CGST Act, 2017).