Section 137 of The Central Goods and Services Tax Act, 2017
- (1)Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
- (2)Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
- (3)Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons.
- (4)Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. Explanation--- For the purposes of this section,---
- (i)"company" means a body corporate and includes a firm or other association of individuals; and
- (ii)"director", in relation to a firm, means a partner in the firm.
Summary
- This provision explains who is held responsible when a company or similar group commits an offence.
- The person in charge of running the company's business at the time of the offence is considered guilty along with the company.
- Other officers like directors or managers are also guilty if the offence happened with their consent or due to their neglect.
- These rules also apply to partners in a firm, the karta of a Hindu Undivided Family, and the managing trustee of a trust.
- A person will not be punished if they prove the offence happened without their knowledge or that they tried their best to prevent it.
Practical examples
FAQ
1. Who is punished when a company breaks the law under Section 137 of The Central Goods and Services Tax Act, 2017?
Under Section 137 of The Central Goods and Services Tax Act, 2017, both the company and the person in charge of its business at the time of the offence are deemed guilty.
2. Are directors always liable for a company's tax offences under Section 137 of the CGST Act?
Under Section 137 of the CGST Act, a director is only deemed guilty if the offence was committed with their consent, connivance, or due to their negligence.
3. Does Section 137 of the GST Act apply to a Hindu Undivided Family?
Yes, Section 137 of the GST Act applies to a Hindu Undivided Family, and the karta is deemed guilty of the offence.
4. How can a manager avoid punishment under Section 137 of this tax law?
Under Section 137 of this tax law, a person is not liable if they prove the offence was committed without their knowledge or that they exercised all due diligence to prevent it.
Test yourself
Q1.Under Section 137 of The Central Goods and Services Tax Act, 2017, if a trust commits an offence, who is specifically deemed guilty?
Q2.What is a valid defense for a company officer under Section 137 of the CGST Act?
Q3.Under Section 137 of the GST law, when is a company secretary deemed guilty?
Q4.According to Section 137 of The Central Goods and Services Tax Act, 2017, how is the term "director" interpreted when the offending entity is a firm?