August 2019

PERSONAL RESPONSIBILITY OF DIRECTORS UNDER VAT / GST

G. G. GOYAL | Chartered Accountant
C. B. THAKAR | Advocate

INTRODUCTION

As per normal understanding, the directors are not liable for any dues of the company. Limited companies are basically formed to limit the financial liabilities to the extent of the assets of the company. However, in spite of such a legal position, an attempt is made by the authorities to cast liability on the directors. Normally, directors of a public limited company are not covered for personal recovery even by any specific provision. However, there may be specific provisions for casting liability on the directors of a private limited company. For example, under the Maharashtra Value Added Tax Act, 2002, section 44(6) provides for personal liability of directors of a private limited company. The said section is reproduced below for ready reference:

 

(6) Subject to the provisions of the Companies Act, 2013 (18 of 2013), where any tax or other amount is recoverable under this Act from a private company, whether existing or wound up or under liquidation, for any period, (but) cannot be recoverable, for any reason whatsoever, then, every person who was a director of the private company during such period shall be jointly and severally liable for the payment of such tax or other amount 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 affairs of the said company.

 

It can be seen that the liabil

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