Delhi High Court Holds Advocates Acting as Insolvency Professionals Liable to GST Under Forward Charge; Says Insolvency Services Are Distinct From Traditional Legal Services
Delhi High Court Clarifies Dual GST Treatment for Advocates: Reverse Charge for Legal Practice, Forward Charge When Acting as Insolvency Professionals
Facts
The Delhi High Court considered a writ petition filed by Kanwal Chaudhary, an Advocate practising since 1995 and registered as an Insolvency Professional since 27 July 2017. The petition challenged an IBBI communication dated 9 March 2021 concerning the GST mechanism applicable to his professional fees as an Interim Resolution Professional.
On 13 December 2018, the NCLT, Delhi Bench appointed Chaudhary as the Interim Resolution Professional (IRP) of Ireo Fiveriver Pvt. Ltd. in insolvency proceedings under the IBC. He subsequently raised invoices for services rendered as IRP.
A dispute arose regarding payment of his professional fees. Chaudhary maintained that, as an Advocate, he was not required to obtain GST registration because services supplied by Advocates were covered by the reverse charge mechanism (RCM) under Section 9(3) of the CGST Act and the applicable notifications.
The NCLT ultimately directed payment of the outstanding ₹49,04,988 to Chaudhary but sought clarification from IBBI regarding who was liable to deposit GST.
On 9 March 2021, IBBI clarified that “Insolvency and Receivership” services were not covered by reverse charge and directed Chaudhary to furnish GST-compliant invoices for his IRP professional fees.
Chaudhary challenged that determination under Article 226, seeking a declaration that services rendered by an Advocate under the IBC remained governed by reverse charge.
The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain pronounced judgment on 13 August 2026.
Issues
The central issue identified by the Court was:
Whether an Advocate who acts as an Insolvency Professional is governed by the forward charge mechanism or the reverse charge mechanism for payment of GST.
The Court divided the question into three components:
- What GST mechanism applies to services rendered by Advocates?
- What GST mechanism applies to Insolvency Professionals?
- Which mechanism applies when an Advocate acts specifically in the capacity of an Insolvency Professional?
The case therefore required the Court to determine whether GST liability follows the professional identity of the service provider or the nature and statutory character of the service actually rendered.
Petitioner’s Arguments
Chaudhary argued that IBBI lacked jurisdiction to determine whether Advocates acting as Insolvency Professionals were subject to forward charge.
His substantive case was that Advocates are expressly governed by reverse charge under Notification Nos. 12/2017 and 13/2017-Central Tax (Rate) and that an Advocate does not cease to be an Advocate merely because he accepts an insolvency assignment.
He contended that “legal service” is broadly defined to include advice, consultancy or assistance in any branch of law and that the work performed by an Insolvency Professional is heavily dependent upon knowledge and application of law.
Accordingly, services rendered by an Advocate as an Insolvency Professional should continue to constitute legal services.
The petitioner further argued that Chartered Accountants and other professionals could legitimately be subjected to forward charge because their ordinary professional services were already governed by that mechanism, but Advocates constituted a separate class whose legal services were expressly placed under reverse charge.
He also relied upon the Bar Council of India Rules to contend that an Advocate cannot carry on business or engage in incompatible employment. Therefore, if insolvency work were treated as something other than legal services, it could potentially jeopardise an Advocate’s continued enrolment.
Respondents’ Arguments
The GST Department argued that taxability depends upon the nature of the service rendered rather than the professional identity of the supplier.
It emphasised that an IRP performs functions such as:
- managing the corporate debtor;
- inviting and verifying creditors’ claims;
- convening Committee of Creditors meetings;
- administering the insolvency process; and
- dealing with resolution plans.
These were characterised as administrative and managerial functions rather than conventional legal practice.
The respondents also relied heavily upon the GST Scheme of Classification of Services. While 99821 separately deals with “legal services”, 998241 specifically deals with “insolvency and receivership services.”
IBBI argued that Insolvency Professionals operate under an independent statutory regime created by the IBC and IBBI Regulations. Their qualification, registration, duties, assignments, code of conduct and disciplinary control are regulated under that regime, irrespective of their underlying professional qualification.
Bar Council of India’s Stand
Significantly, the Bar Council of India supported the respondents’ position.
BCI stated that when an Advocate acts as an Insolvency Professional, the services rendered are significantly different from conventional legal services. It took the position that such services are managerial/professional in nature and therefore attract forward charge, not the reverse charge applicable to traditional legal services.
Analysis of the Law
Advocates Ordinarily Fall Under Reverse Charge
The Court first examined the ordinary GST regime governing Advocates.
Notification No. 12/2017 defines “legal service” broadly as services relating to advice, consultancy or assistance in any branch of law, including representation before courts, tribunals and authorities.
Notification No. 13/2017 places specified legal services supplied by Advocates to business entities under the reverse charge mechanism, making the recipient responsible for GST.
The Court accordingly recognised that, when Advocates provide legal services in their capacity as Advocates, reverse charge continues to apply.
Insolvency Professionals Fall Under Forward Charge
The position was different for Insolvency Professionals.
The Court examined Sections 207 and 208 of the IBC and the IBBI Regulations and found that Insolvency Professionals operate within a distinct and self-contained statutory framework.
Under Section 9(1) CGST Act, the normal/default position is that the supplier pays GST through the forward charge mechanism.
Reverse charge under Section 9(3) is an exception and operates only for specifically notified categories.
Since insolvency professional services are not included among the services notified for reverse charge under Notification No. 13/2017, the ordinary forward charge rule applies.
Insolvency Professionals Constitute a Distinct Statutory Class
This was one of the judgment’s most important findings.
The Court held that Insolvency Professionals constitute a singular and distinct statutory class governed by the IBC and IBBI Regulations.
The tax treatment of that class cannot change merely because individual members possess different underlying professional qualifications.
Thus, an Insolvency Professional who happens to be an Advocate cannot claim a different GST regime from an Insolvency Professional who happens to be a Chartered Accountant, Company Secretary or another eligible professional.
The Court noted statistical material showing that, as of 30 June 2025, there were 4,558 registered Insolvency Professionals, of whom only 283 were members of a Bar Council—less than 6%. This reinforced that Advocates constitute only a small subset of the larger statutory class of Insolvency Professionals.
Specific GST Classification Prevails
The Scheme of Classification of Services provided further support.
The Court noted that:
- 99821 deals with legal services;
- its subcategories cover legal advisory, representation, documentation, arbitration and other legal services;
- 99824 separately deals with insolvency and receivership services; and
- 998241 specifically covers insolvency and receivership services.
The Court found these categories to be distinct.
Insolvency and receivership services do not fall within the residual category of “other legal services.” Instead, they have their own specific and independent classification.
Accordingly, merely because insolvency work may involve substantial legal knowledge does not convert it into “legal services” for GST purposes.
Advocate’s Identity Does Not Alter Nature of IRP Services
The Court adopted a functional approach.
An Advocate may perform different legally permissible professional functions. The GST treatment follows the capacity in which the person is acting and the nature of the services supplied.
Therefore:
Advocate rendering legal services → Reverse Charge
Advocate acting as Insolvency Professional → Forward Charge
The Court held that there could be no distinction between Insolvency Professionals as a class merely because one particular Insolvency Professional was also enrolled as an Advocate.
Advocates Act and IBC Can Coexist
The petitioner had argued that if insolvency services were not treated as legal services, an Advocate might have to suspend his enrolment.
The Court rejected this concern.
The IBBI Regulations themselves expressly recognise an Advocate enrolled with a Bar Council as one of the categories eligible to qualify as an Insolvency Professional.
Accordingly, the Advocates Act and IBC must be read harmoniously.
Permitting Advocates to undertake specialised insolvency work does not derogate from the Advocates Act. Instead, the IBC creates an additional legally recognised professional stream available to Advocates.
When performing that specialised role, however, the Advocate is governed by the IBC and IBBI Regulations, rather than the regulatory regime governing conventional legal services.
Precedent Analysis
J.K. Mittal & Company v. Union of India
The petitioner relied upon the Delhi High Court proceedings in J.K. Mittal, where ambiguity had initially arisen regarding whether all legal services provided by lawyers and law firms were covered by reverse charge.
The Court had directed that no coercive action be taken against lawyers pending clarification.
Subsequently, the GST position concerning Advocates’ legal services was clarified, and the Court in the present case accepted that legal services rendered by Advocates continue to be governed by reverse charge.
However, this did not resolve the separate question of insolvency professional services because those services constitute a distinct category.
Commissioner of Commercial Tax v. A.R. Thermosets (P) Ltd.
The GST Department relied upon this Supreme Court authority in support of the proposition that where a service or commodity falls within a specific classification, that classification should prevail over a more general category.
This supported treating insolvency and receivership services under their specific classification rather than subsuming them within the broader category of legal services.
Moorco (India) Ltd. v. Collector of Customs
This authority was similarly relied upon for the specific-over-general classification principle.
The classification principle supported the conclusion that Code 998241—specifically dealing with insolvency and receivership services—should govern instead of the general legal-services classification.
Swiss Ribbons Pvt. Ltd. v. Union of India
IBBI relied upon Swiss Ribbons to emphasise the statutory character and nature of the functions performed by resolution professionals under the IBC, including their managerial, administrative and quasi-judicial dimensions.
The Court’s ultimate analysis was consistent with the proposition that an Insolvency Professional’s role cannot simply be equated with conventional legal representation or advice.
Court’s Reasoning
The Court ultimately drew a clear distinction between who the professional is and what professional service is being supplied.
An Advocate’s enrolment does not mean that every service rendered by that person automatically becomes a “legal service” for GST purposes.
When functioning as an Insolvency Professional, the person:
- derives authority from the IBC;
- is registered by IBBI;
- performs statutory insolvency functions;
- is regulated by the IBBI Regulations;
- is subject to IBBI’s code of conduct and disciplinary jurisdiction; and
- supplies a service specifically classified as “insolvency and receivership services.”
The Court therefore held that the IBBI’s 9 March 2021 determination reflected the correct legal position, a conclusion also supported by BCI’s affidavit.
Conclusion
The Delhi High Court conclusively held that Advocates enrolled with a Bar Council who act as Insolvency Professionals under the IBC are governed by the forward charge mechanism for GST.
They must therefore obtain GST registration and comply with the consequential requirements of the CGST Act, Rules and applicable notifications in the same manner as other Insolvency Professionals.
Importantly, the Court limited this ruling to services rendered in the capacity of an Insolvency Professional. It expressly clarified that ordinary legal services rendered by Advocates remain governed by the reverse charge mechanism.
Kanwal Chaudhary was accordingly directed to furnish GST-compliant invoices for the professional fees charged by him as IRP in CP(IB) No. 408/2018.
The writ petition and pending applications were disposed of in those terms.
Case Details
Case: Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India & Ors.
Court: High Court of Delhi at New Delhi
Case Number: W.P.(C) 9410/2021
Judges: Justice Prathiba M. Singh and Justice Shail Jain
Date: 13 August 2026
Result: IBBI’s position upheld; Advocate acting as an Insolvency Professional held liable under forward charge and directed to furnish GST-compliant invoices. Ordinary legal services by Advocates remain under reverse charge.
