Company & Directors Liability under GST

A company registered under the Companies Act, 2013 and Directors of a company could be held liable for the payment of tax, interest or penalty due under GST. In this article, we analyse the liability of a company and its Directors as per GST rules and regulations.

Directors Liability under GST

If any tax, interest or penalty is due from a

private limited company and the amount cannot be recovered from the company, the Director(s) of the private limited company would be held, jointly and severally, liable for the payment of GST. If the Director(s) can prove that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his/her part in relation to the affairs of the company, the liability of such Director can be extinguished.

Share Transfer or Transfer of Business

In case a taxable perosn under GST, liable to pay any tax, interest or penaly under GST transfer his business in whole or in part, the person to whom the business is transferred shall also be, jointly and severally liable for the payment of unpaid. Even if a business is transferred to another person without consideration or by way of gift or lease or hire, the transferee would be liable for payment of GST, wholly or to the extend of transfer.

GST registration is mandatory for any person who is a transferee acquiring a business as a going-concern. Hence, after transfer of the business, the transferee must pay tax on supply of goods or services, effected by him from the date of transfer.

Mergers and Amalgamations

In case two or more companies are merged or amalgamated as per the order of a Court or a Tribunal, the supply of goods or services until the date from which the order takes effect must be included in the turnover of the respective company. Thus the respective company would be liable for payment of GST until the date of merger or amalgamation.

Winding Up of Company

If a company is under windingup under the orders of a court or Tribunal, the person appointed as liquidator of any of the assets of the company must provide an intimation to the Commissioner within 30 days of appointment. On receiving the intimation, the Commissioner must intimate the Liquidator about the amount payable by the company for payment of tax, interest or penalty within 3 months. If before or during or after the liquidation of a company any tax, interest or penalty is unpaid by the company, the Director(s) would be held jointtly and severally liable. Only Directors who can prove that non-recovery of GST is not due to any gross neglect, misfeasance or breach of duty on his/her part in relation to the affairs of the company would be released from liability.