Liability of Partners of a Firm to Pay Tax Under Section 90 of GST

When it comes to taxation under the GST regime in India, understanding the liability of individuals involved in a business structure is crucial. One such provision that outlines the accountability of business partners is Section 90 of the CGST Act, 2017. This section focuses on the liability of partners of a firm to pay tax, ensuring that tax dues are recoverable even if the firm’s structure or membership changes over time.

What Does Section 90 of the CGST Act State?

Section 90 deals specifically with the joint and several liability of partners in a partnership firm for payment of tax, interest, or penalty. The section is designed to ensure that the government does not lose tax revenue due to internal arrangements among partners or changes in partnership composition.

Key Highlights of Section 90

1. Joint and Several Liability
   Regardless of any agreement among partners or any other law, if a partnership firm is liable to pay tax, interest, or penalty, then:

   • The firm itself,

   • And each partner,
     is jointly and severally liable to pay such dues.

   This means that the government can recover the full amount from the firm or from any one or more partners individually.

2. Liability of Retiring Partners
   If a partner retires from the firm, he is still liable for any tax, interest, or penalty up to the date of his retirement, whether it has been determined on that date or not.

3. Mandatory Intimation of Retirement

   • The retiring partner or the firm must notify the Commissioner about the partner’s retirement in writing.

   • This notification must be given within one month from the date of retirement.

   • If no such intimation is provided, the retiring partner’s liability continues even after retirement, until the Commissioner receives the written notice.

Why Is Section 90 Important for Partnership Firms?

1. Ensures Tax Compliance

This provision acts as a safeguard for the government by holding each partner accountable for GST dues. It encourages proper maintenance of tax records and compliance with GST norms by firms.

2. Discourages Evasion Through Internal Agreements

Even if there is a private contract among partners that limits liability, such contracts have no bearing on tax authorities. The law ensures tax recoverability irrespective of internal business arrangements.

3. Protects Against Disputes Post-Retirement

By mandating notification to the Commissioner, Section 90 provides a clear cut-off point for tax liability of retiring partners, preventing future disputes and uncertainties.

What Are the Practical Implications for Partners?

Due Diligence Required Before Retirement

Partners planning to retire from a firm must:

• Ensure that all tax dues are up to date.

• Give timely notice to the GST department to limit future liabilities.

Firms Must Maintain Accurate Records

The firm must track changes in partnership and promptly inform the GST authorities to avoid unnecessary liabilities on former partners.

Tax Planning Becomes Crucial

With joint and several liability, tax planning and legal compliance become crucial for each partner. Partners should seek professional guidance to understand their exposure and obligations.

How Can Firms and Partners Safeguard Themselves?

• Maintain Written Agreements: Though these do not override tax liability under GST, having well-documented agreements helps with internal management.

• Timely Notifications: Always notify the Commissioner within the stipulated time to prevent ongoing liability for retired partners.

• Regular Tax Audits: Conduct periodic internal audits to ensure the firm is complying with all GST obligations.

• Professional Support: Work with qualified tax professionals or CAs to stay informed and compliant.

Conclusion

Section 90 of the CGST Act serves as a powerful reminder that tax liability is not limited to the firm alone—each partner holds personal accountability as well. For partnership firms, it is essential to understand these provisions to avoid legal complications, especially during partner exits or structural changes.

Understanding the scope of liability under Section 90 ensures transparent tax practices and protects all stakeholders from unexpected financial consequences.