The High Court of Delhi has ruled that advocates enrolled with the Bar Council who act as Insolvency Professionals under the Insolvency and Bankruptcy Code, 2016 (IBC) are governed by the ‘forward charge mechanism’ for the payment of Goods and Services Tax (GST). A Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain held that advocates rendering insolvency and receivership services are required to obtain GST registration and furnish GST-compliant invoices in the same manner as applicable to Insolvency Professionals as a class. The Court clarified that this ruling strictly applies to services rendered in the capacity of an Insolvency Professional and does not alter the ‘reverse charge mechanism’ otherwise applicable to legal services provided by advocates in their legal capacity.
Background of the Case
The petitioner, Mr. Kanwal Chaudhary, an advocate enrolled with the Bar Council of Delhi since 1995, qualified the Limited Insolvency Examination and was registered as an Insolvency Professional on July 27, 2017. On December 13, 2018, the National Company Law Tribunal (NCLT), Delhi Bench, admitted an application under Section 9 of the IBC filed by Workspace Consulting Pvt. Ltd. in CP(IB) No. 408/2018 and appointed the petitioner as the Interim Resolution Professional (IRP) for the corporate debtor, Ireo Fiveriver Pvt. Ltd.
During his tenure, the petitioner raised invoices dated August 13, 2019, and October 31, 2019, for his professional fees. On September 17, 2019, Mr. K.V. Jain was appointed as the Resolution Professional and took over the assignment. Due to non-payment of his fee, the petitioner filed applications before the NCLT seeking directions for the release of payments.
On September 1, 2020, the NCLT directed Mr. K.V. Jain to examine the invoices. Subsequently, Mr. K.V. Jain requested the petitioner to issue GST-compliant invoices. The petitioner responded that he was neither registered under GST nor required to be registered, claiming exemption under Section 9(3) and Section 9(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) read with Notification No. 12/2017-Central Tax (Rate) and Notification No. 13/2017-Central Tax (Rate). He asserted that GST, if applicable, was payable by the corporate debtor on a reverse charge basis.
On October 7, 2020, the NCLT directed the disbursement of the balance fee of Rs. 49,04,988/- to the petitioner and referred the issue of GST payment liability to the Insolvency and Bankruptcy Board of India (IBBI) for clarification. On March 9, 2021, the IBBI issued a communication stating that ‘Insolvency and Receivership’ services are not covered under the reverse charge mechanism and directed the petitioner to submit GST-compliant invoices. Aggrieved by this clarification, the petitioner filed a writ petition before the Delhi High Court seeking to quash the IBBI communication.
Arguments of the Parties
The counsel for the petitioner contended that the IBBI lacked jurisdiction to determine the applicability of the forward charge mechanism to advocates acting as Insolvency Professionals. It was submitted that advocates are governed by the reverse charge mechanism under Notification No. 12/2017 and Notification No. 13/2017. Relying on interim orders passed by the Delhi High Court in J.K. Mittal & Company v. Union of India & Ors. (W.P.(C) 5709/2017), the petitioner argued that legal services cover advice, consultancy, or assistance in any branch of law, including insolvency law. It was further submitted that under the Bar Council of India Rules, advocates can only render legal services, and treating insolvency services as non-legal services would force the suspension of an advocate’s enrolment.
The counsel representing the GST Department argued that taxability under the GST regime is determined by the nature of the service rendered, not the professional identity of the person rendering it. It was submitted that functions performed by an Insolvency Professional—such as managing corporate affairs, inviting creditor claims, and conducting Committee of Creditors (CoC) meetings—are administrative and managerial, rather than conventional legal practice. The Department argued that the specific entry for ‘insolvency and receivership services’ (Code 998241) under the Scheme of Classification of Services overrides the general entry for ‘legal services’ (Code 99821), placing reliance on Supreme Court judgments in Commissioner of Commercial Tax v. A. R. Thermosets (P.) Ltd. and Moorco (India) Ltd. v. Collector of Customs, Madras.
The counsel for the IBBI presented statistical data showing that as of June 30, 2025, out of 4,558 registered Insolvency Professionals, only 283 (less than 6%) were advocates. It was argued that IP services are not exclusive to advocates and require clearing the Limited Insolvency Examination. Referring to the Supreme Court judgment in Swiss Ribbons Pvt. Ltd. v. Union of India, it was emphasized that the duties of resolution professionals under Sections 17, 18, 20, 22, 23, and 25 of the IBC are managerial, administrative, and quasi-judicial.
The Bar Council of India (BCI) filed an affidavit dated September 6, 2025, stating that when an advocate acts as an Insolvency Professional, the nature of services rendered is significantly different from conventional legal services and is taxable under the forward charge mechanism.
Court’s Analysis
The High Court analyzed three core aspects: the GST mechanism applicable to advocates, the mechanism applicable to Insolvency Professionals, and the mechanism applicable to advocates acting as Insolvency Professionals.
The Court observed that under Notification No. 13/2017-Central Tax (Rate) as amended by a corrigendum dated September 25, 2017, legal services provided by individual advocates or law firms are subject to the reverse charge mechanism. However, for Insolvency Professionals, their services are not listed among the specified categories under Notification No. 13/2017, meaning the default rule under Section 9(1) of the CGST Act—the forward charge mechanism—applies.
When examining advocates acting as Insolvency Professionals, the Court held that the determinative factor is the role performed and the nature of the service, rather than the underlying professional qualification. The Bench highlighted that under Regulation 5(c) of the IBBI Regulations, eligibility to become an Insolvency Professional is open to multiple categories, including Chartered Accountants, Company Secretaries, Cost Accountants, managers, and advocates. Advocates constitute only a minor fraction of the total pool.
The Court examined the GST Scheme of Classification of Services under Heading 982 (‘Legal and Accounting Services’) and noted that ‘legal services’ (Code 99821) and ‘insolvency and receivership services’ (Code 998241) are classified under separate, co-ordinate sub-heads. The Preface to the Scheme explicitly states: “…where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.”
The Bench reiterated the well-settled principle that a specific entry overrides a general entry, quoting the Supreme Court’s ruling in Moorco (India) Ltd. v. Collector of Customs: “…The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries the one most nearer to the description should be preferred.”
The Court also highlighted the BCI’s position in its affidavit, which noted: “…when an advocate is appointed as an Insolvency Resolution Professional (“IRP”) or Resolution Professional under the Insolvency and Bankruptcy Code, 2016 (“IBC”), the nature of services rendered is significantly different from conventional legal practice/services.”
Addressing the petitioner’s concern regarding the Bar Council rules, the Bench held that the Advocates Act, 1961 and the IBC must be read harmoniously. Since Regulation 5(c)(iv)(d) of the IBBI Regulations expressly recognizes enrolled advocates as eligible for registration, undertaking such specialized roles under a separate statutory framework does not derogate from the Advocates Act or jeopardize an advocate’s enrolment.
Court’s Decision
The High Court held that the IBBI’s communication dated March 9, 2021, reflects the correct position in law and dismissed the challenge to it.
The Court issued the following key conclusions and directions:
- Advocates enrolled with the Bar Council who act as Insolvency Professionals under the IBC are governed by the ‘forward charge mechanism’. They are required to obtain GST registration and comply with all consequential requirements under the CGST Act, 2017.
- This direction strictly applies to services rendered in the capacity of an Insolvency Professional and does not affect or alter the reverse charge mechanism applicable to legal services rendered by advocates in their capacity as advocates.
- The petitioner was directed to furnish GST-compliant invoices for the professional fees charged for his services as an Interim Resolution Professional in CP(IB) No. 408/2018.
Case Details:
Case Title: Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India & Ors.
Case No.: W.P.(C) 9410/2021
Bench: Justice Prathiba M. Singh, Justice Shail Jain
Date: August 13, 2026
