What does this Section say?

Section 88 deals with companies undergoing liquidation. When a company enters liquidation proceedings, the liquidator is required to inform the GST department about his appointment within the prescribed time.

After receiving such intimation, the Commissioner may notify the amount that should be set aside to cover existing or expected GST liabilities. The liquidator must reserve sufficient funds before distributing assets among creditors, shareholders, or other stakeholders.

If the liquidator fails to comply with these requirements, he may become personally liable for the tax amount that should have been set aside. This ensures that Government dues are considered before the company's assets are distributed.

The section protects revenue interests during liquidation, where assets are often limited and multiple creditors compete for recovery. It establishes a clear mechanism for securing GST dues before final settlement of the company's affairs.

The provision does not override laws relating to insolvency where specific provisions apply, but it ensures that GST authorities receive proper notice and an opportunity to safeguard tax recovery.

The objective is to prevent situations where company assets are exhausted through distributions while tax liabilities remain unpaid.

Example

A company enters liquidation with pending GST dues. The liquidator must reserve the amount specified by the department before distributing remaining assets.

Key Points

• Applies when a company is in liquidation.
• Liquidator must inform GST authorities.
• Funds may need to be set aside for GST dues.
• Non-compliance can create personal liability.

In One Line

A liquidator must protect Government GST dues before distributing company assets.