Section 89 – Liability of Partners of Firm to Pay Tax
Section 89 of CGST Act, 2017 – Liability of Partners of Firm to Pay Tax
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Objective of Section 89
Section 89 ensures that GST dues of a partnership firm are not defeated by dissolution, retirement of partners or lack of assets in the firm.
It fixes personal liability on partners for GST dues of the firm.
2. Statutory Provision – Section 89
Section 89(1):
Notwithstanding anything contained in the Indian Partnership Act, 1932,
where any firm is liable to pay any tax, interest or penalty
under this Act,
the firm and each of the partners of the firm
shall be jointly and severally liable
for such payment.
Section 89(2):
Where any partner retires from the firm,
he or the firm shall intimate the Commissioner
by a notice in writing
within one month from the date of such retirement,
and where such intimation is given,
the retired partner shall not be liable
for any tax, interest or penalty
due from the firm
under this Act
in respect of any supply
made after the date of retirement.
Section 89(3):
Where no such intimation is given,
the retired partner shall continue to be liable
to pay any tax, interest or penalty
due from the firm
under this Act.
3. Key Features of Section 89
- Overrides the Partnership Act
- Applies to all partners
- Joint and several liability
- Liability continues unless proper intimation is given
4. Meaning of Joint and Several Liability
Joint and several liability means:
- GST department can recover full dues from any partner
- Recovery need not be proportionate to profit-sharing ratio
- Internal settlement among partners is irrelevant to GST recovery
5. Liability of Retired Partner
A retired partner:
- Is liable for GST dues up to the date of retirement
- Is also liable for future dues if retirement is not intimated
Timely intimation is crucial to avoid future exposure.
6. Requirement of Intimation to Commissioner
Intimation must:
- Be in writing
- Be given within one month of retirement
- Clearly specify date of retirement
Without intimation, GST law presumes continuation of liability.
7. Section 89 vs Section 88
- Section 88: Liability of directors of private company
- Section 89: Liability of partners of firm
Both pierce the entity structure to secure tax recovery.
8. Dissolution of Firm
On dissolution:
- GST liability does not cease
- Partners remain personally liable
- Recovery can be initiated against any partner
Dissolution does not extinguish tax dues.
9. Practical Scenarios
- Firm closed without paying GST
- One partner retires without GST intimation
- Firm has no assets
In all cases, partners can be proceeded against individually.
10. Judicial Principles
Courts have observed that:
- Partner liability is statutory and strict
- Proper intimation is mandatory for protection
- Recovery provisions must follow due process
11. Risk Mitigation for Partners
- Ensure regular GST compliance of firm
- Give timely retirement intimation
- Maintain proof of communication with department
12. Related Provisions
13. Professional Insight
Section 89 makes GST compliance a personal responsibility for partners. Retirement or dissolution without proper GST closure can result in long-term personal exposure. Under GST, partners must exit carefully — not casually.
Disclaimer: This article is prepared based on the CGST Act, Rules, notifications and prevailing legal position as applicable till date. Partner liability depends on facts, timely intimation and judicial interpretation.
Comments