In a decisive ruling, the Delhi High Court has upheld the IBBI’s position that ‘insolvency and receivership services’ rendered by Advocates as IRPs/RPs constitute a distinct statutory class governed by the IBC, and not by the Advocates Act, 1961, for the purposes of GST. The Court held that when an Advocate renders services as an Insolvency Professional, the role in which he acts, that is, as an Insolvency Professional, is determinative of the nature of services for the purpose of classification under GST, and not the underlying professional qualification or registration of the individual.
Services rendered by an Advocate acting as an Insolvency Professional would fall under the specific head of ‘insolvency and receivership services’ under the Scheme of Classification of Services, rather than the general head of ‘legal services’, irrespective of the individual’s underlying qualification as an Advocate, added the Court.
The Court ruled that Insolvency Professionals constitute a distinct statutory class governed exclusively by the IBC and the IBBI Regulations, and the fact that such persons may also possess other qualifications or registrations would not alter the class to which they belong for the purpose of GST. The Court further held that the Advocates Act, 1961 and the IBC are required to be read in a harmonious manner, and permitting Advocates to additionally qualify as Insolvency Professionals does not derogate from the Advocates Act but merely offers another stream for rendering specialised services.
The Court therefore concluded that the reverse charge mechanism applicable to Advocates would not extend to services rendered by Advocates in the capacity of Insolvency Professionals, and such persons would be governed by the forward charge mechanism applicable to Insolvency Professionals as a class. Accordingly, the Court directed that Advocates enrolled with the Bar Council, who act as Insolvency Professionals under the IBC, shall be governed by the forward charge mechanism, and shall be liable to obtain GST registration and comply with all consequential requirements under the CGST Act, 2017 and the rules and notifications framed thereunder, in the same manner as applicable to Insolvency Professionals as a class.
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The Division Bench comprising Justice Pratibha M. Singh and Justice Shail Jain framed three questions for determination: the GST mechanism applicable to Advocates, the GST mechanism applicable to Insolvency Professionals, and the GST mechanism applicable to Advocates who act as Insolvency Professionals. On the first aspect, the Court noted that under Notification No. 12/2017-Central Tax (Rate), an ‘advocate’ is defined with reference to the Advocates Act, 1961, and ‘legal service’ is defined to mean any service provided in relation to advice, consultancy or assistance in any branch of law, including representational services before any court, tribunal or authority.
Further, Notification No. 13/2017-Central Tax (Rate) specifies that services supplied by an individual advocate or firm of advocates by way of legal services to a business entity shall be subject to GST on reverse charge basis, payable by the recipient. The Court further took note of the Coordinate Bench orders in J.K. Mittal & Co. v. UOI [W.P.(C) 5709/2017], which held that all legal services provided by advocates, law firms, or LLPs of advocates would continue to be governed by the reverse charge mechanism unless they opted for voluntary registration under Section 25(3) of the CGST Act.
On the second aspect, the Court observed that under Section 9(1) of the CGST Act, the default rule is that the supplier is liable to pay GST under the forward charge mechanism, and since services rendered by Insolvency Professionals are not separately notified under Notification No. 13/2017, they fall within the default rule and are governed by the forward charge mechanism. The Court also examined Regulation 5(c) of the IBBI (Insolvency Professionals) Regulations, 2016, which prescribes multiple alternative eligibility routes, including ten years’ experience as an Advocate enrolled with the Bar Council, Chartered Accountant, Company Secretary, or Cost Accountant, or qualifications in management.
The Court further observed that under the Scheme of Classification of Services, ‘insolvency and receivership services’ are classified under a specific and independent sub-head 998241, which is co-ordinate with, and not subordinate to, the sub-head 99821 pertaining to ‘legal services’. The Court applied the well-settled principle that a specific entry prevails over a general entry, as affirmed by the Supreme Court in Moorco (India) Ltd. v. Collector of Customs, Madras [(1994) Supp (3) SCC 562] and Commissioner of Commercial Tax v. A.R. Thermosets (P.) Ltd. [(2016) 16 SCC 122]. The Court also noted the affidavit dated 6th September 2025 filed by the Bar Council of India, which affirmed that when an Advocate is appointed as an Insolvency Professional, the nature of services rendered is significantly different from conventional legal practice, and such services are taxable under the forward charge mechanism.
Briefly, a petition was filed by Kanwal Chaudhary, an Advocate registered with the Bar Council of Delhi since 1995, who had also cleared the Limited Insolvency Examination and was registered as an Insolvency Professional with the IBBI since 27th July 2017. On 13th December 2018, the NCLT Delhi Bench, while admitting a Section 9 application filed by Workspace Consulting Pvt Ltd., appointed him as the Interim Resolution Professional for the Corporate Debtor, Ireo Fiveriver Pvt Ltd. In that capacity, the Petitioner raised invoices for his professional fees.
Later, K.V. Jain was appointed as the Resolution Professional and took over the assignment. Since payments were not released, the Petitioner moved an application before the NCLT, which directed payment of Rs. 49 lakhs and referred the GST question to the IBBI. The Petitioner contended that he was exempt from GST registration, being covered under the reverse charge mechanism in terms of Section 9(3) and (4) of the CGST Act read with Notification No. 12/2017 and 13/2017-Central Tax (Rate). The IBBI however held that ‘Insolvency and Receivership’ services are not covered under the reverse charge mechanism and directed the Petitioner to furnish GST compliant invoices.
