Updated: 15 September 2026

Section 89 of CGST Act - Liability of Directors of Private Company

Section 89 of the Central Goods and Services Tax Act, 2017 creates a special recovery rule for certain unpaid GST liabilities of a private company. If tax, interest or penalty due from the company for a relevant period cannot be recovered, a person who was a director during that period may become jointly and severally liable, subject to the statutory defence provided in the section.

Text and meaning of Section 89
Conditions for director liability
Statutory defence available to a director
Conversion of private company into public company
Related CGST provisions

Section 89 - statutory rule and plain-language meaning

Sub-section (1): Notwithstanding anything contained in the Companies Act, 2013, where tax, interest or penalty due from a private company in respect of a supply for any period cannot be recovered, every person who was a director of that private company during that period is jointly and severally liable for payment, unless the director proves that the non-recovery cannot be attributed to gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

Sub-section (2): Where a private company is converted into a public company, the liability rule in sub-section (1) does not apply to a person who was its director in relation to tax, interest or penalty for supplies made while it was a private company, if the amount could not be recovered before conversion. This protection does not extend to a personal penalty imposed on that director.

The opening words, "notwithstanding anything contained in the Companies Act, 2013", give Section 89 overriding effect for the specific GST recovery situation covered by the provision. The section does not state that every director automatically owes every GST liability of the company. Its operation depends on the statutory conditions, including inability to recover the relevant amount from the private company and the director having held office during the relevant period.

Important: Section 89 concerns recovery of tax, interest or penalty from directors in the circumstances specified by the Act. The existence and quantum of the underlying company liability, the relevant tax period, recovery steps, and the director's statutory defence may all be material in an individual case.

When can a director become liable under Section 89?

Private companyThe primary liability must be due from a private company.

Relevant periodThe person sought to be made liable must have been a director during the period to which the relevant supply and liability relate.

Amount dueThe provision expressly covers tax, interest and penalty due from the private company.

Non-recoveryThe statutory trigger is that the amount due from the private company cannot be recovered.

Joint and several liabilityOnce the provision applies, every covered director is stated to be jointly and severally liable.

Defence remains availableA director may avoid liability by proving the absence of the specified causal misconduct or default.

Defence: gross neglect, misfeasance or breach of duty

Section 89(1) expressly gives a director a defence. The director must prove that the company's non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on the director's part in relation to the affairs of the company.

In practical terms, the statutory wording makes the director's role, conduct, period of directorship and connection with the circumstances leading to non-recovery important. Documentary material concerning resignation or appointment, board responsibility, management of tax affairs, payments, financial control and steps taken to ensure statutory compliance may therefore become relevant depending on the facts.

Meaning of key expressions

Expression	Meaning in the context of Section 89
Jointly and severally liable	The provision permits recovery of the covered liability from persons on whom the section validly imposes liability, subject to the statutory conditions and defence.
Gross neglect	A serious failure of care or attention. Whether conduct reaches this level depends on the facts and the director's responsibilities.
Misfeasance	Improper performance of a lawful act or duty in relation to the company's affairs.
Breach of duty	Failure to discharge a duty attributable to the director in relation to the affairs of the company.

Private company converted into a public company

Section 89(2) contains a specific exception where a private company is converted into a public company. For tax, interest or penalty relating to supplies made during the period when it was a private company and not recovered before conversion, sub-section (1) does not apply to a person who was a director of the private company. However, the proviso preserves any personal penalty imposed on that director.

Section 89 forms part of Chapter XVI, "Liability to Pay in Certain Cases". Nearby provisions deal with company liquidation, partners of firms, guardians and trustees, and other special liability situations.

Official GST resources

For the statutory Act, amendments, notifications and current departmental material, verify the provision through the official CBIC GST Acts portal and the GST common portal. The statutory text should be read with amendments and applicable notifications in force for the relevant period.

Disclaimer: This article is a general explanation of Section 89 of the CGST Act and is not a substitute for professional advice on the facts of a particular recovery proceeding.