Indirect Tax Laws · Liability to Pay in Certain Cases

Liability of Agents, Principals and Representatives under GST

Updated 5 October 2026 · Fact-checked

Under CGST, an agent who supplies or receives taxable goods for a principal is jointly and severally liable with the principal for the tax on those goods. Tax, interest or penalty on an incapacitated person's business is recoverable from the guardian, trustee or Court of Wards in like manner and to the same extent.

Understand Liability of Agents, Principals and Representatives

GST is levied on the taxable person. But in real life, businesses are often run through others. An agent sells goods for a principal. A guardian runs a minor's business. A court-appointed manager looks after an estate. The law must say who can be pursued when tax is not paid. That is what this topic settles.

Agent and principal. Where an agent supplies or receives taxable goods on behalf of his principal, the agent and the principal are liable for the tax payable on those goods, jointly and severally. Jointly and severally means the department can recover the whole amount from either one or from both. It does not have to split the demand 50:50 or chase the principal first. The liability is limited to the tax payable on those goods. How the two settle it between themselves is a private matter under their contract.

Representatives of incapacitated persons. Where the business of a taxable person is managed by a guardian, trustee or agent on behalf of a minor or other incapacitated person, the tax, interest or penalty is levied on and recoverable from the guardian, trustee or agent in like manner and to the same extent as it would be from the person represented. The same applies where a Court of Wards, Administrator-General, Official Trustee, receiver or manager appointed by a court takes charge of the property or business. The representative does not take the taxable person's place as the person liable. The business stays the taxable person's, and the department also has a real person to recover from.

Section numbers. These rules sit in Chapter XV of the CGST Act, Liability to pay in certain cases. The agent and principal rule is Section 86. The guardian, trustee or agent of a minor or incapacitated person rule is Section 91. The Court of Wards, Administrator-General, Official Trustee, receiver or court-appointed manager rule is Section 92. Do not mix these up with Section 85 (transfer of business), Section 87 (amalgamation or merger of companies) and Section 88 (company in liquidation). These are separate topics. Even so, write the rule in words in the exam. Marks come from the rule and the application, not from a remembered number.

Key rules to remember

Agent and principal: liability: Agent supplies or receives taxable goods on behalf of principal ⇒ agent and principal are jointly and severally liable for the tax payable on those goods; Tax on those goods can be recovered in full from either. This is the rule in Section 86.
Meaning of jointly and severally: Joint liability + several liability = department may recover the whole from any one or from all; Do not write that liability is shared equally or that the principal must be pursued first.
Guardian, trustee or agent managing an incapacitated person's business: Tax, interest or penalty is levied on and recoverable from the guardian, trustee or agent in like manner and to the same extent as from the person represented; Applies to a minor or other incapacitated person whose business is managed by a guardian, trustee or agent (Section 91).
Court of Wards and court-appointed managers: Court of Wards, Administrator-General, Official Trustee, receiver or manager appointed by a court managing the property or business of a taxable person ⇒ tax, interest or penalty levied on and recoverable from it in like manner and to the same extent as from that person; The recovery extends to tax, interest and penalty (Section 92). The business remains the taxable person's.

How to solve Liability of Agents, Principals and Representatives questions

Use this method for any case question on liability of agents, principals and representatives.

1Identify who is the taxable person: the principal, the minor, or the incapacitated owner of the business.
2Identify the role of the other party: agent, guardian, trustee, Court of Wards, receiver or other court-appointed manager.
3Check what the person did. For an agent, did he supply or receive taxable goods on behalf of the principal? For a representative, is he managing the business or property of the incapacitated person?
4State the rule in plain words in one or two sentences. Quote the section number only if you are sure of it (Section 86 for agent and principal).
5Apply the rule to the facts: name who is liable and whether the liability is joint and several or in like manner as the person represented.
6Compute or state the amount recoverable, covering tax, interest and penalty if the question gives them.
7Conclude clearly: who can the department proceed against, and what remains between the parties as their own contractual matter.

Quickest way: Role, rule, recovery

When to use it: Use in the 3-hour paper for short case-scenario MCQs and short written parts.

Underline the role words: agent, principal, guardian, trustee, Court of Wards, receiver, minor.
Agent on taxable goods: write that both are jointly and severally liable.
Representative of incapacitated person: write that he is liable like the person represented.
Add one line on recovery: the department can proceed against either the agent or the principal, or against the representative.

Common mistakes in Liability of Agents, Principals and Representatives

Writing that the department must first recover from the principal and only then from the agent.
Students confuse agency with a guarantee, where the primary debtor is pursued first.
Fix: Remember jointly and severally: the whole amount can be recovered from either one or from both, with no order imposed.
Saying liability is split in proportion to each party's share of profit or commission.
Students assume joint liability means equal sharing.
Fix: State that the department can claim the full tax from any one. Any apportionment is between the parties under their contract.
Applying the agent-principal rule without matching the facts to it, for example where it is not clear that the person acts as an agent on behalf of the principal.
Students generalise the idea of agency.
Fix: Match the facts to the provision: the agent supplies or receives taxable goods on behalf of the principal. State the facts against that rule before concluding.
Saying the minor or incapacitated person has no GST liability because a guardian manages the business.
Students think the guardian replaces the taxable person entirely.
Fix: The business is the taxable person's. The tax, interest or penalty can be levied on and recovered from the guardian in like manner and to the same extent as from the person represented.
Treating the Court of Wards or a court-appointed receiver as exempt from GST recovery because it is a court-linked authority.
Students think of courts as outside the tax law.
Fix: If it manages the property or business of a taxable person, tax, interest or penalty can be levied on and recovered from it in like manner and to the same extent as from that person.
Writing section numbers from memory and mixing them up with the liability on transfer of business or company liquidation.
The liability chapter has many similar sections in sequence.
Fix: Describe the rule in words and match the section number to the bare Act: Section 86 for agent and principal, Section 85 for transfer of business, Section 88 for liquidation. Keep these as separate topics.

Worked examples

Example 1

Ravi Traders, a registered principal, appoints Mahesh as its agent. Mahesh sells taxable goods on its behalf in a tax period. GST of ₹4,50,000 on these supplies is not paid. The department finds the principal has closed its bank accounts. Whom can the department proceed against, and for how much?

Show the solution

Taxable person: Ravi Traders is the principal. Mahesh is the agent supplying taxable goods on its behalf.
Rule: where an agent supplies taxable goods on behalf of a principal, the agent and the principal are jointly and severally liable for the tax payable on those goods.
Application: the facts match the rule. Mahesh supplied taxable goods for the principal, and ₹4,50,000 of tax on those goods is unpaid.
Meaning of joint and several liability: the department can recover the full ₹4,50,000 from either party or from both. It need not first exhaust recovery against the principal.
Effect of the closed bank accounts: this does not stop the department. It can proceed against Mahesh for the ₹4,50,000 payable on those goods.

Answer: The department can recover the ₹4,50,000 tax payable on those goods from Mahesh, from Ravi Traders, or from both. Mahesh cannot say that the principal must be pursued first. Any recourse he has against the principal is a matter of their contract.

Example 2

Anita, aged 15, inherits a registered trading business. Her uncle Karan is appointed her guardian and runs the business on her behalf. GST of ₹2,10,000 for a tax period remains unpaid. From whom can the tax be recovered, and is the minor status of Anita a defence?

Show the solution

Taxable person: the business belongs to Anita, a minor, so she is an incapacitated person for this purpose.
Role: Karan manages the business as guardian on behalf of the minor.
Rule: where the business of a taxable person is managed by a guardian, trustee or agent on behalf of a minor or other incapacitated person, the tax, interest or penalty is levied on and recoverable from the guardian, trustee or agent in like manner and to the same extent as from the person represented.
Application: the tax can be levied on and recovered from Karan as it would be from Anita if she were of full capacity. Anita's age does not remove the business from GST.
Amount: the tax, plus any interest or penalty that the law attaches, can be recovered from Karan as guardian. Here the tax stated is ₹2,10,000.

Answer: The unpaid ₹2,10,000 (with interest and penalty, if any) can be levied on and recovered from Karan, as guardian managing the business, in like manner and to the same extent as from Anita. Anita's minority is not a defence to the business's GST liability.

Exam tips

In case-scenario MCQs, spot the role word first: agent, principal, guardian, trustee, Court of Wards, receiver. The correct option usually follows directly from the role.
Use the phrase jointly and severally for agent and principal, and the phrase like manner and to the same extent for representatives. These are the key phrases.
Write the answer in provision, facts, conclusion form: rule in one line, facts matched to it, then who is liable.
Do not drift into liability on transfer of business, liquidation, directors or partners unless the case asks for it. Those are separate provisions with their own conditions.
Check the section numbers against your bare Act or study material before the exam. If you are unsure, state the rule in words.

Practice questions from Liability to Pay in Certain Cases

Liability of Agents, Principals and Representatives in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Liability of Agents, Principals and Representatives: frequently asked questions

Who is liable under GST when an agent supplies goods for a principal?

Both the agent and the principal are jointly and severally liable for the tax payable on taxable goods the agent supplies or receives on the principal's behalf. The department can recover the full amount from either of them or from both.

Does joint and several liability mean each pays half?

No. It means the department may claim the entire tax from any one of them. How they settle the amount between themselves depends on their own contract.

Who pays GST if the business of a minor is run by a guardian?

The tax, interest or penalty is levied on and recoverable from the guardian, trustee or agent managing the business, in like manner and to the same extent as from the minor. The business stays the minor's and stays within GST.

Does the same rule apply to the Court of Wards or a court-appointed receiver?

Yes. Where the Court of Wards, Administrator-General, Official Trustee, receiver or manager appointed by a court manages the property or business of a taxable person, the tax, interest or penalty is levied on and recoverable from that representative in like manner and to the same extent as from the taxable person.

Should I quote section numbers in the answer?

Quote a section number only if you are sure of it. The agent and principal rule is Section 86 of the CGST Act. Section numbers in this chapter are easily mixed up, so a correct statement of the rule in plain words with proper application earns the marks.