India GST Law Clarifies Director Liability in Liquidations and Limits ITC Relief

The Madras High Court ruled that under Section 88(3) of the CGST Act, directors of a company that has entered liquidation are not automatically liable for the company’s GST arrears. Liability can be avoided if a director can demonstrate that the tax shortfall is not due to gross neglect, misfeasance, or breach of duty. This decision underscores the statutory defence available to directors when a liquidated entity cannot satisfy its tax obligations.

Separately, a recent analysis of Section 16(6) of the CGST Act confirms that relief for retrospectively cancelled GST registrations does not extend to recipients of input tax credit (ITC). Only the former registrant can claim ITC on eligible invoices; recipients who have already claimed ITC cannot reclaim it even if the supplier’s registration is later restored, as the relief is confined to the registrant’s own credit.