Section 137 of CGST Act - Offences by Companies

Section 137 of the Central Goods and Services Tax Act, 2017 deals with criminal liability when an offence under the CGST Act is committed by a company or by certain other business entities. It identifies the company and the persons who may be proceeded against, and also provides a statutory defence based on absence of knowledge or exercise of due diligence.

Updated: 15 September 2026

In brief: Liability under Section 137 is connected to an offence under the CGST Act. For a company, the company itself and persons who were in charge of and responsible for its business at the relevant time may be liable. Directors, managers, secretaries and other officers may also be liable where consent, connivance or negligence is proved. Sub-section (4) preserves the defence of lack of knowledge or due diligence.

Text and meaning of Section 137

Sub-section (1): Where an offence under the Act is committed by a company, every person who, at the time of the offence, was in charge of and responsible to the company for the conduct of its business, as well as the company, is deemed guilty and may be proceeded against and punished.

Sub-section (2): Independently of sub-section (1), a director, manager, secretary or other officer may also be deemed guilty if the company's offence is proved to have been committed with that person's consent or connivance, or is attributable to that person's negligence.

Sub-section (3): For an offence by a taxable person that is a partnership firm, Limited Liability Partnership, Hindu Undivided Family or trust, the partner, karta or managing trustee, as applicable, is deemed guilty, and sub-section (2) applies with necessary modifications.

Sub-section (4): A person covered by the section is not liable to punishment if that person proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent its commission.

Explanation: For this section, "company" means a body corporate and includes a firm or other association of individuals. "Director", in relation to a firm, means a partner in the firm.

The authoritative statutory text should be checked in the Central Goods and Services Tax Act, 2017 on India Code.

Who can be liable under Section 137?

Person or entity	Basis of potential liability
Company	The company may itself be prosecuted where an offence under the CGST Act is committed by it.
Person in charge and responsible for business	Sub-section (1) applies to a person who held both relevant responsibility and control at the time the offence was committed.
Director, manager, secretary or other officer	Sub-section (2) applies where consent, connivance or attributable negligence is proved.
Partner, karta or managing trustee	Sub-section (3) extends the provision to partnership firms, LLPs, HUFs and trusts.

Meaning of key expressions

"In charge of, and responsible to, the company"

Sub-section (1) uses both requirements. The relevant inquiry is therefore the person's role in the conduct of the company's business at the time of the alleged offence, rather than merely the person's designation.

Consent, connivance or negligence

Sub-section (2) creates an additional route to liability for a director, manager, secretary or other officer where the prosecution proves the specified personal connection with the company's offence.

Due diligence defence

Sub-section (4) expressly protects a covered person from punishment if the person proves either that the offence occurred without his knowledge or that he exercised all due diligence to prevent it. Records showing internal controls, compliance supervision, escalation and corrective action may therefore be relevant depending on the facts.

Relationship with Section 132 and prosecution

Section 137 does not by itself list the substantive GST offences or prescribe the imprisonment terms. The principal punishment provision is Section 132 - Punishment for certain offences. Section 137 addresses who may bear liability when the offender is a company or one of the other entities specified in the section.

CBIC's prosecution instructions also address prosecution of legal and natural persons and specifically discuss Section 137. See the CBIC prosecution instruction. Questions of cognizance should also be read with Section 134 - Cognizance of offences.

Practical points for companies and officers

Identify who actually controlled and was responsible for the relevant business function when the alleged offence occurred.
Preserve board records, delegations, compliance manuals, tax review records and communications that may show responsibility and due diligence.
Distinguish the company's alleged offence from the separate statutory basis asserted against an individual officer.
Read Section 137 together with the substantive offence, prosecution sanction and cognizance provisions applicable to the case.

Legal note: Section 137 is a criminal-liability provision and its application depends on the precise allegation, the underlying offence and evidence concerning the role of each accused person. The statutory text and applicable notifications, circulars, instructions and judicial decisions should be checked for the relevant period.

Related CGST Act provisions

This page is intended for general legal information and should be read with the current statutory text and facts of the particular matter.