Liability of director in case of Public Limited Company under CGST Act 2017
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, but CGST Act 2017 segregate Liability on Private and Public company.
In this article, we analyse the liability of a company and its Directors as per GST rules and regulations.
Section 89 of CGST Act, 2017
- (1) Notwithstanding anything contained in the Companies Act, 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.
- If the private company having dues converts into a public company, then the directors private company cannot be held liable.
- Since there is no other section talking about liability of directors in public companies and as this section explicitly states that directors are not held liable if the company converts from a private company to public company, it can be understood that there is no liability of directors of public companies, which includes listed companies.
Section 137 of the CGST Act, 2017
- (1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
(3) Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons.
(4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
Explanation.––For the purposes of this section,––
(i) “company” means a body corporate and includes a firm or other association of individuals; and
(ii) “director”, in relation to a firm, means a partner in the firm
- This section refers to offences committed by and resulting punishment and penalties for all companies – private and public.
- If it is found that any other person, who may be a director, manager, secretary or other officer, was also involved in committing the offence, he/she will also be held liable and punished accordingly.
- There will be no liability on the person if he/she proves that the offence committed was without his/ her knowledge and he/she had exercised all due-diligence for its prevention
FROM THE ABOVE TWO SECTIONS OF THE CGST ACT, IT IS UNDERSTOOD THAT THERE IS NO LIABILITY FOR DIRECTORS OF PUBLIC COMPANIES FOR NON-PAYMENT OF DUES LIKE TAXES, INTEREST AND PENALTIES.
HOWEVER, THE DIRECTORS OF SUCH COMPANIES ARE HELD LIABLE, PROCEEDED AGAINST AND PUNISHED IF THEY ARE INVOLVED IN ANY OFFENCES COMMITTED BY THEIR COMPANIES
(Written and contributed by Mr. Akshat Bansal. He can be reached at firstname.lastname@example.org)
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