Corporate governance has evolved significantly under the GST regime. In cases of tax default by a private company, the department is increasingly invoking Section 89 of the CGST Act to hold directors personally liable.
Understanding Section 89
Section 89 states that where any tax due from a private company cannot be recovered, every person who was a director of such company during the period shall be jointly and severally liable for the payment of such tax.
Legal Defences Available to Directors
A director can escape this joint liability if they prove that the non-recovery of tax cannot be attributed to any gross neglect, misfeasance, or breach of duty on their part in relation to the affairs of the company.
Best Practices for Independent and Non-Executive Directors
- Ensure that GST compliance reports are regularly tabled and reviewed in Board meetings.
- Document any dissents or concerns raised regarding aggressive tax positions in the Board minutes.
- Seek independent legal opinions on high-stakes tax advisory matters.
Our team assists in navigating through complex tax procedures, ensuring your rights & legal standings are fully upheld. Our commitment to each client is unwavering, as we labor tirelessly to craft robust defenses, drawing upon our vast experience and profound understanding of the law.
