The Institute of Chartered Accountants of India (ICAI), through its GST & Indirect Taxes Committee, has released the Second Edition (October 2026) of the “Handbook on Liability to Pay in Certain Cases under GST”, providing comprehensive guidance on the statutory framework governing the liability of various persons for payment of tax, interest and penalties under the Goods and Services Tax (GST) law. The updated publication covers Sections 85 to 94 of Chapter XVI of the Central Goods and Services Tax (CGST) Act, 2017, incorporating the legal position updated up to September 30, 2026.
The revised Handbook aims to assist taxpayers, chartered accountants, legal professionals, businesses and other stakeholders in understanding situations where GST liability may extend beyond the person originally responsible for paying tax. It explains the statutory principles of joint and several liability, representative liability and vicarious liability, particularly in cases involving business transfers, corporate restructuring, mergers, liquidation, dissolution and succession.
GST Liability May Extend Beyond the Original Taxpayer
The Handbook explains that although GST liability ordinarily rests with the supplier under the forward charge mechanism or the recipient under the reverse charge mechanism, Chapter XVI of the CGST Act provides for liability to be imposed upon other specified persons in certain circumstances.
Such liability is not automatic merely because a person is associated with a business. It arises only when the conditions prescribed under the relevant statutory provisions are satisfied.
Key Provisions Covered under Sections 85–94 of the CGST Act
Section 85 – Liability in Case of Transfer of Business: Where a taxable person transfers a business, wholly or partly, through sale, gift, lease or any other mode, the transferor and transferee may be jointly and severally liable for outstanding GST, interest and penalties relating to the period up to the transfer. This includes liabilities determined after the transfer in respect of the earlier period.
Section 86 – Liability of Agent and Principal: Where an agent supplies or receives taxable goods on behalf of a principal, both the agent and principal are jointly and severally liable for GST payable on such goods. The Handbook also discusses the distinction between an agent and an intermediary under GST.
Section 87 – Liability in Case of Amalgamation or Merger: The Handbook examines GST implications arising from amalgamation or merger of companies, particularly the treatment of transactions between companies during the relevant period and the statutory liability of the entities involved.
Section 88 – Liability in Case of Company Liquidation: The publication explains the responsibilities of liquidators and the circumstances in which directors may become liable for unpaid GST dues when a company undergoes liquidation.
Section 89 – Liability of Directors of Private Companies: The Handbook analyses circumstances in which directors of private companies may be held jointly and severally liable for unrecovered GST dues, including the statutory protection available where a director establishes that non-recovery cannot be attributed to gross neglect, misfeasance or breach of duty.
Section 90 – Liability of Partners of Firms: The Handbook discusses the joint and several liability of partners for GST dues of a partnership firm and the implications of retirement or changes in partnership arrangements.
Sections 91 and 92 – Liability of Guardians, Trustees, Receivers and Managers: These provisions address liability in situations where a business is conducted on behalf of minors, incapacitated persons or estates managed by guardians, trustees, Court of Wards, receivers or other specified persons.
Section 93 – Liability in Special Cases: The Handbook explains the consequences of the death of a taxable person, including the liability of legal representatives or persons continuing the business, as well as other specified circumstances involving tax, interest and penalties.
Section 94 – Liability in Other Cases: The publication discusses GST liability arising from discontinuance, dissolution, partition or reconstitution of businesses, firms, Hindu Undivided Families and other specified taxable persons.
Important Clarification on Transfer of Business and Outstanding GST Dues
The Handbook highlights that Section 85 of the CGST Act may apply even where outstanding tax, interest or penalty is determined after the transfer of business, provided such liability relates to the period before the transfer.
It further explains the distinction between a transfer of individual business assets and the transfer of a business as a going concern. Reference has been made to judicial pronouncements, including M/s JR Metal Chennai Ltd. v. Assistant Commissioner of Central Tax (Andhra Pradesh High Court, 2024), concerning the applicability of Section 85 in cases involving transfer of business assets.
The publication also refers to Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017, concerning exemption for services by way of transfer of a going concern, as a whole or an independent part thereof, and Circular No. 96/15/2019-GST dated March 28, 2019, dealing with transfer of business following the death of a sole proprietor.
Emphasis on Statutory Safeguards and Recovery Proceedings
A significant aspect of the revised Handbook is its explanation that liability under Chapter XVI must be examined in accordance with the specific statutory conditions, the nature and period of liability, and the procedural safeguards available under GST law.
The publication also discusses the statutory mechanism for proceeding against persons liable under Chapter XVI, including the relevance of tax determination, notices, adjudication and recovery procedures.
Practical Significance for Businesses and Professionals
The updated publication is particularly relevant for company directors, partners, business purchasers, legal heirs, insolvency professionals, liquidators and GST practitioners, as it provides guidance on identifying potential GST exposures arising from restructuring, succession and changes in business ownership.
The Handbook is expected to serve as a useful reference for undertaking GST due diligence before business acquisitions, mergers, transfers and liquidation, and for evaluating the extent of liability where tax demands are raised against persons other than the original taxable person.
Effect of the Publication: The revised Handbook consolidates the statutory framework, detailed analysis, practical illustrations and significant judicial pronouncements relating to liability under Sections 85–94 of the CGST Act. It aims to improve awareness, facilitate effective GST compliance and assist stakeholders in understanding their legal responsibilities and available safeguards.
The Handbook can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/11/Handbook-on-Liability-to-Pay-in-Certain-Cases-under-GST.pdf
