Chapter XVI - Liability to pay in certain cases
Section 89
Section 89: Liability of directors of private company
Section 89 addresses director liability for unrecovered GST dues of a private company, with a statutory defence and conversion rule.
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This article is for general information. Refer to the Central Goods and Services Tax Act, 2017 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Notwithstanding anything contained in the Companies Act, 2013 (18 of 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.
Introduction
The trigger is non-recovery of tax, interest or penalty due from a private company for a period when the person was a director.
Key takeaways
Joint liability
Relevant-period directors can be jointly and severally liable when company dues cannot be recovered.
Defence
A director can show that non-recovery was not attributable to their gross neglect, misfeasance or breach of duty in company affairs.
Conversion
The section limits the rule after conversion to public company for prior private-company periods, while preserving personal penalties.
Joint liability
Relevant-period directors can be jointly and severally liable when company dues cannot be recovered.
Defence
A director can show that non-recovery was not attributable to their gross neglect, misfeasance or breach of duty in company affairs.
Conversion
The section limits the rule after conversion to public company for prior private-company periods, while preserving personal penalties.
Practical checklist
Do
- Identify exact dues and the director’s service period.
- Document recovery attempts against the company.
- Preserve governance and compliance records relevant to the defence.
Avoid
- Assume a private contract, merger date or restructuring automatically removes statutory GST liability.
Frequently asked questions
Does company conversion erase a director’s personal penalty?
No. The conversion proviso expressly preserves personal penalties.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026