213.            ABC Pvt Ltd, was having following liabilities as on 1.3.2017 which are not recoverable:

Tax: 2 lacs

Interest: 25,000

Penalty: 1 lacs

The shareholders of the company decided to convert the company to a public company on 15.3.2017 & after following the procedure new registration certificate was issued to the company on 30.3.2017. What shall be the liability of the directors of the company & by what amount?

The total dues outstanding before conversion= Rs. 3, 25, 000

(Tax: 2 lacs + Interest: 25,000 + Penalty: 1 lacs)

As per section 89(2) of the CGST Act,  Where a private company is converted into a public company and the tax, interest or penalty in respect of any supply of goods or services or both for any period during which such company was a private company cannot be recovered before such conversion, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax, interest or penalty in respect of such supply of goods or services or both of such private company.

Thus, on conversion, all the liabilities, obligations of previous company will be migrated to the new company. The directors of the company shall not be liable to pay the tax dues as it is carried forward in the same manner in the name of new company.