Indirect Tax Laws · Liability to Pay in Certain Cases

Liability of Directors, Partners and Other Persons under GST

Updated 5 October 2026 · Fact-checked

Under CGST, a person other than the taxpayer can be made to pay its dues. Directors of a private company are jointly and severally liable if dues cannot be recovered, unless they prove no gross neglect. Partners are jointly and severally liable with the firm. Legal representatives and Court-appointed managers pay in the taxpayer's place.

Understand Liability of Directors, Partners and Other Persons

GST dues are tax, interest and penalty. Normally the registered person who owes them pays them. But a company, a firm or a dead person cannot always pay. The law therefore names other persons who step in so that revenue is not lost. This chapter asks one question: who else can the department recover from, and on what conditions?

Directors of a private company (Section 89). If tax, interest or penalty due from a private company for a period cannot be recovered, every person who was a director during that period is jointly and severally liable. This applies even where the company is in liquidation. The law applies notwithstanding the Companies Act, 2013. The director has one general defence: he must prove that the non-recovery cannot be attributed to gross neglect, misfeasance or breach of duty on his part in relation to the company's affairs. So the burden of proof is on the director, not the department. The section covers private companies only.

Conversion into a public company. Where a private company is converted into a public company, and the dues for a period when it was private could not be recovered before the conversion, Section 89(1) does not apply to a person who was a director of the private company in relation to those dues, unless it is proved that the non-recovery is attributable to his gross neglect, misfeasance or breach of duty.

Partners of a firm (Section 90). The firm and each partner are jointly and severally liable for the firm's tax, interest and penalty, whatever the partnership deed says. A retiring partner does not escape automatically. Either he or the firm must give written notice of the retirement date to the Commissioner. If the notice is given within one month of retirement, his liability is limited to dues up to the date of retirement. If it is not, his liability continues until the date the notice is received by the Commissioner.

Other persons. Where an estate or business is under a Court of Wards, Administrator-General, Official Trustee or a receiver or manager appointed by a Court (Section 91), the tax on the business is levied on and recovered from that person or body in the same manner as it would be from the owner. Where the estate or business of a minor or other incapacitated person is managed by a guardian, trustee or agent (Section 92), the tax is levied on and recovered from that person in the same way. On the death of a taxable person (Section 93), the dues are those payable by the deceased under the Act. If the business is continued after death by the legal representative or another person, that person pays the tax due from the deceased. If the business is discontinued, whether before or after death, the legal representative pays the tax due from the deceased only out of the estate, to the extent the estate can meet the charge. This covers tax determined before death but unpaid, and tax determined after death.

Key rules to remember

Director liability (Section 89): Dues of private company unrecoverable ⇒ every person who was a director during the period of the dues is jointly and severally liable; Defence: the director proves non-recovery is not due to gross neglect, misfeasance or breach of duty. Applies to private companies only.
Conversion to public company: Private company converted into public company, and dues for the private-company period not recovered before conversion ⇒ Section 89(1) does not apply to a person who was a director of the private company in relation to those dues; Under this provision, Section 89(1) does not apply to such a director unless it is proved that the non-recovery is attributable to his gross neglect, misfeasance or breach of duty.
Partner liability (Section 90): Firm liable ⇒ firm and every partner jointly and severally liable, notwithstanding any contract to the contrary; A partnership deed clause shifting GST liability between partners does not bind the department.
Retiring partner: notice within one month: Notice to Commissioner within 1 month of retirement ⇒ liability limited to the firm's dues up to date of retirement; The dues may be determined later. They still count if they relate to the period up to retirement.
Retiring partner: late or no notice: Notice not given within 1 month ⇒ liability for the firm's dues continues up to the date notice is received by the Commissioner; The notice must be in writing. Either the partner or the firm may give it. The date of receipt governs, not the date of giving.
Legal representative of deceased (Section 93): Business continued after death ⇒ the person continuing it pays the tax due from the deceased. Business discontinued ⇒ legal representative pays the tax due from the deceased out of the estate only; The dues are those payable by the deceased, whether determined before or after death. In the discontinued case liability is limited to the extent the estate can meet the charge.
Court of Wards and similar bodies (Section 91): Estate or business under Court of Wards, Administrator-General, Official Trustee, or Court-appointed receiver or manager ⇒ tax levied on and recovered from that body in the same manner as from the owner; Guardians, trustees and agents of minors or incapacitated persons are dealt with in a similar way in Section 92.

How to solve Liability of Directors, Partners and Other Persons questions

Use this order for any case question. It keeps your answer in provision, facts, conclusion form.

1Identify the defaulter: a private company, a public company, a firm, a deceased person, or an estate under a Court or a guardian.
2Pick the section: directors of a private company (89), partners (90), Court of Wards or Court-appointed receiver or manager (91), guardians, trustees or agents of a minor or incapacitated person (92), death of the taxable person (93).
3Fix the period of the dues. For directors, check who held office during the period of supply. For partners, check who was a partner and when.
4Check the trigger. For directors, were the dues actually unrecoverable from the company? For partners, is the firm liable?
5Test the exceptions: the director's gross neglect defence, conversion to a public company, the retirement notice and its timing, or whether the deceased's business continued.
6State the extent of liability: joint and several, limited to the retirement date, limited to the estate, and so on.
7Conclude in one line naming the persons liable and the amount, if given.

Quickest way: Three-question check

When to use it: Use it for short MCQs and for the first five minutes of a written answer.

Who defaulted? That decides the section.
Is there a condition or defence? Gross neglect for directors, the notice date for partners, the estate limit for legal representatives.
Which period or amount? Match the person's term of office or partnership to the dues, then write the conclusion.

Common mistakes in Liability of Directors, Partners and Other Persons

Applying Section 89 to directors of a public company.
Students remember 'directors are liable' and drop the words 'private company'.
Fix: Check the company type first. Section 89 covers private companies only.
Holding every director liable with no defence.
The words 'jointly and severally' make students forget the proviso-like exception.
Fix: Always add that the director escapes if he proves the non-recovery is not due to gross neglect, misfeasance or breach of duty.
Making a director liable for dues of a period when he was not on the board.
Students focus on the company's default and ignore the director's tenure.
Fix: Liability attaches to persons who were directors during the period to which the dues relate. Match the dates.
Saying a retired partner is free the moment he retires.
Students confuse retirement with intimation.
Fix: Retirement alone is not enough. A notice to the Commissioner within one month limits liability to the firm's dues up to the retirement date. Without it, liability for the firm's dues continues up to the date the notice is received.
Letting a partnership deed clause override the Act.
In partnership law, the deed controls the partners' internal rights.
Fix: Section 90 applies notwithstanding any contract to the contrary. The deed binds only the partners among themselves.
Making the legal representative personally liable without limit.
Students miss the difference between continued and discontinued business.
Fix: If the business is discontinued, the representative pays only out of the deceased's estate, to the extent it can meet the dues. If someone continues the business, that person pays the dues.

Worked examples

Example 1

Mehta Traders Pvt. Ltd., a private company, has GST dues of ₹8,40,000 (tax, interest and penalty) for 2025-26 that the department cannot recover as the company has no assets. Anil and Bhaskar were directors throughout that year. Anil was a non-executive director who had flagged the unpaid GST in board minutes and resigned objecting to the diversion of funds. Bhaskar managed finance and diverted the GST collected to personal investments. Chitra joined the board only in 2026-27. Who is liable?

Show the solution

Provision: Section 89 CGST. If a private company's dues for a period cannot be recovered, every person who was a director during that period is jointly and severally liable. The director may escape by proving the non-recovery is not due to gross neglect, misfeasance or breach of duty.
Facts: The company is private and the dues cannot be recovered, so Section 89 applies. Anil and Bhaskar were directors during 2025-26. Chitra was not.
Anil: He is within the section, but he can discharge the burden of proof. The board minutes show he objected and acted to stop the default, so the non-recovery cannot be attributed to his neglect or breach of duty.
Bhaskar: He diverted GST collected. This is misfeasance and breach of duty, so no defence is available.
Chitra: She was not a director during the period of the dues, so she is outside the section for these dues.

Answer: Bhaskar is jointly and severally liable for the ₹8,40,000. Anil is liable unless he proves the defence, and on these facts he is likely to succeed. Chitra is not liable.

Example 2

Rao & Co., a partnership firm, has partners P, Q and R. R retired on 31 January 2027. The firm gave written notice of the retirement to the Commissioner on 10 March 2027, and the Commissioner received it the same day. Later, a demand of ₹3,00,000 was raised on the firm for supplies made in February 2027 and ₹2,00,000 for supplies made in December 2026. The partnership deed says a retiring partner is not liable for any GST dues. Discuss R's liability.

Show the solution

Provision: Section 90 CGST. The firm and each partner are jointly and severally liable, notwithstanding any contract to the contrary. If notice of retirement is given to the Commissioner within one month, the retiring partner is liable for the firm's dues up to the date of retirement. If notice is not given within one month, his liability continues for the firm's dues up to the date the Commissioner receives the notice.
Deed clause: It binds only the partners among themselves. It does not bind the department, so it cannot defeat the department's right against R.
Timing of notice: One month from 31 January 2027 ended on 28 February 2027. The notice was given and received on 10 March 2027, so it was late.
Effect: Because the notice was late, R's liability covers the firm's dues up to the date the Commissioner received the notice, that is, 10 March 2027. The date of receipt governs.
Apply to dues: The ₹2,00,000 for supplies of December 2026 relates to a period before 10 March 2027, so R is liable. On these facts, the ₹3,00,000 for supplies of February 2027 also relates to a period before 10 March 2027, so it too falls within the period up to the date of receipt.

Answer: On these facts, R is jointly and severally liable with the firm and the other partners for the full ₹5,00,000 (₹2,00,000 + ₹3,00,000), because both sets of supplies fall in the period up to 10 March 2027, the date the notice was received. The deed clause does not bind the department. Had the notice been given by 28 February 2027, his liability would have been limited to the firm's dues up to 31 January 2027, that is, the ₹2,00,000.

Exam tips

Write the section number with the person: 89 for directors, 90 for partners, 91 for Court-appointed bodies, 92 for guardians and trustees, 93 for legal representatives.
In a director case, always check two things before concluding: private company or not, and whether the director was in office during the period of the dues.
For a retiring partner, work out the exact one-month date from the retirement date and compare it with the notice date. Examiners build cases on this.
Use the words 'jointly and severally', 'notwithstanding any contract to the contrary', and 'to the extent of the estate' in the right places. They carry marks.
In MCQs, read for traps such as a public company, a director who joined later, or discontinued business.

Practice questions from Liability to Pay in Certain Cases

Liability of Directors, Partners and Other Persons 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 Directors, Partners and Other Persons: frequently asked questions

Are directors of a public company liable under Section 89 of CGST?

No. Section 89 applies to a private company. A director of a public company is not caught by it, although other provisions of the Act may apply to the company itself.

Can a director avoid liability under Section 89?

Yes. He must prove that the non-recovery of the dues cannot be attributed to gross neglect, misfeasance or breach of duty on his part in relation to the company's affairs. The burden of proof is on him.

Does a partner's GST liability end when he retires?

Not automatically. Either he or the firm must notify the Commissioner in writing. If this is done within one month of retirement, his liability is limited to dues up to the retirement date. If not, it continues until the notice is received.

Who pays GST dues after the death of a registered person?

The legal representative. If the business is continued by the legal representative or another person, that person pays the dues. If the business is discontinued, the legal representative pays only out of the deceased's estate, to the extent it can meet the dues.