Section 87 – Liability in Case of Company in Liquidation
Section 87 of CGST Act, 2017 – Liability in Case of Company in Liquidation
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective of Section 87
Section 87 ensures that GST dues are properly accounted for and recovered when a company goes into liquidation.
It casts specific statutory obligations on the liquidator and fixes liability in respect of tax dues of the company.
2. Statutory Provision – Section 87
Section 87(1):
Where any company is being wound up
whether under the orders of a court or tribunal
or otherwise,
the liquidator shall,
within 30 days of his appointment,
give intimation of his appointment
to the Commissioner.
Section 87(2):
The Commissioner shall,
after making such inquiry or calling for such information
as he may deem fit,
notify the liquidator
within three months
from the date of receipt of such intimation,
the amount which in his opinion
would be sufficient to provide for
any tax, interest or penalty
which is then, or is likely thereafter to become,
payable by the company.
Section 87(3):
The liquidator shall not part with
any assets of the company
until he has been notified by the Commissioner
under sub-section (2),
and on being so notified,
shall set aside an amount equal to the amount notified.
Section 87(4):
If the liquidator fails to give the notice
or fails to set aside the amount,
he shall be personally liable
for the payment of such tax, interest or penalty.
3. Key Responsibilities of Liquidator
Under Section 87, the liquidator must:
- Intimate appointment to Commissioner within 30 days
- Cooperate with GST authorities
- Not dispose assets before GST dues are quantified
- Set aside notified amount for GST dues
4. Nature of GST Dues in Liquidation
GST dues under Section 87 include:
- Tax
- Interest
- Penalty
These may relate to:
- Period before liquidation
- Period during liquidation
5. Personal Liability of Liquidator
A very important aspect of Section 87 is:
- Liquidator can be made personally liable
- Only if statutory duties are violated
This provision ensures diligence and compliance.
6. Section 87 and Insolvency and Bankruptcy Code (IBC)
Where liquidation is under IBC:
- GST department is an operational creditor
- Priority of payment follows IBC waterfall
Section 82 proviso and judicial precedents give overriding effect to IBC.
7. Section 87 vs Section 86
- Section 86: Liability in merger or amalgamation
- Section 87: Liability during liquidation
Both deal with company restructuring, but at different stages.
8. Practical Scenarios
- Company ordered to be wound up by NCLT
- GST audit pending at time of liquidation
- Demand raised after liquidator appointment
In all cases, liquidator must secure GST dues.
9. Judicial Principles
Courts have held that:
- Liquidator must strictly follow Section 87
- Failure can attract personal liability
- However, recovery is subject to IBC priority rules
10. Compliance Checklist for Liquidators
- Immediate intimation to GST Commissioner
- Ascertain pending GST liabilities
- Preserve assets till GST quantification
- Document all correspondence
11. Related Provisions
- Section 82 – First charge on property
- Section 86 – Amalgamation or merger
- Section 79 – Recovery of tax
12. Professional Insight
Section 87 places GST compliance at the heart of liquidation proceedings. Liquidators must treat GST dues seriously, as procedural lapses can lead to personal exposure, even in insolvency situations.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. GST recovery in liquidation is subject to IBC provisions and judicial interpretation.
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