The Delhi High Court has held that advocates who act as Insolvency Professionals under the Insolvency and Bankruptcy Code, 2016 (IBC) are liable to pay Goods and Services Tax (GST) under the forward charge mechanism, and cannot claim the reverse charge treatment otherwise applicable to advocates providing legal services.

The Bench of Justice Prathiba M. Singh and Justice Shail Jain made an important distinction between the capacity in which an advocate renders services and the person’s underlying professional qualification. It held that when an advocate functions as an Insolvency Professional, the nature of the service is that of “insolvency and receivership services”, and the applicable GST regime is the one prescribed for Insolvency Professionals as a class.

The petition arose from a dispute concerning professional fees payable to an Interim Resolution Professional appointed in insolvency proceedings concerning Ireo Fiveriver Pvt. Ltd.

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The petitioner, an Advocate enrolled with the Bar Council of Delhi since 1995, had qualified as an Insolvency Professional and was registered with the IBBI from July 27, 2017. The NCLT, Delhi Bench, appointed him as Interim Resolution Professional for the corporate debtor on December 13, 2018.

During the insolvency proceedings, the petitioner raised invoices for his professional fees. After another Resolution Professional took over the assignment, a dispute arose concerning the unpaid portion of the fees. The NCLT eventually directed payment of the outstanding amount of Rs. 49,04,988, but also sought clarification regarding the GST liability on the professional fees.

The IBBI subsequently issued its clarification dated March 9, 2021, holding that “Insolvency and Receivership” services were not covered by the reverse charge mechanism. It therefore directed the petitioner to furnish GST-compliant invoices for the professional fees charged in his capacity as IRP.

The petitioner challenged the IBBI’s decision before the High Court, contending that since he was an Advocate, his services continued to fall within the reverse charge mechanism applicable to legal services.

The central question before the Court was whether an Advocate acting as an Insolvency Professional should pay GST under the forward charge mechanism applicable to Insolvency Professionals, or under the reverse charge mechanism applicable to Advocates rendering legal services.

The Court divided its examination into three parts: the GST mechanism applicable to Advocates, the mechanism applicable to Insolvency Professionals, and finally the mechanism applicable when an Advocate acts in the capacity of an Insolvency Professional.

The Court first explained the distinction between forward and reverse charge under the CGST Act.

Under Section 9(1) of the CGST Act, GST is ordinarily payable by the supplier of goods or services. Under this forward charge mechanism, the supplier is responsible for charging and paying GST, including the tax component in the invoice.

Section 9(3), however, empowers the Government to notify specified categories of supplies where the recipient, rather than the supplier, becomes liable to pay GST. This constitutes the reverse charge mechanism.

The Court then examined the notifications governing GST treatment of legal services provided by Advocates.

Notification No. 12/2017-Central Tax (Rate) defines an Advocate and “legal service”. The latter broadly covers services relating to advice, consultancy or assistance in any branch of law, including representational services before courts, tribunals or authorities.

Notification No. 13/2017-Central Tax (Rate) provides for payment of GST under reverse charge in respect of specified services provided by individual Advocates, senior Advocates or firms of Advocates to business entities.

On a conjoint reading of these provisions, the Court held that Advocates providing services covered by the relevant notification are governed by the reverse charge mechanism.
The Court also considered its earlier proceedings concerning the GST treatment of legal services, including the orders passed in J.K. Mittal & Company v. Union of India & Ors. The earlier proceedings had addressed uncertainty surrounding the GST registration and reverse charge treatment of legal practitioners.

The High Court noted that, following the relevant notifications, orders and the September 25, 2017 corrigendum, the position applicable to Advocates in respect of their legal services was that GST was payable under the reverse charge mechanism.

The Court thereafter examined the statutory framework governing Insolvency Professionals.

Under the IBC, an Insolvency Professional is a person enrolled with an insolvency professional agency and registered with the IBBI. The IBC separately prescribes the functions and obligations of such professionals, while the IBBI Regulations govern their eligibility, registration, professional conduct and regulatory framework.

The Court emphasised that Insolvency Professionals constitute a distinct statutory class, governed by the IBC and IBBI Regulations.

The Court also noted that the eligibility framework permits persons from different professional backgrounds to become Insolvency Professionals. These include Advocates, Chartered Accountants, Company Secretaries and Cost Accountants, among others, subject to the prescribed qualifications and experience.

Importantly, the Court recorded IBBI’s statistical data showing that as of June 30, 2025, there were 4,558 registered Insolvency Professionals, of whom 283 were Advocates enrolled with the Bar Council, representing less than six per cent of the total.

According to the Court, this demonstrated that Advocates constitute only one segment of the larger statutory class of Insolvency Professionals.

A significant part of the judgment concerns the GST Scheme of Classification of Services.

The Court pointed out that under the broad category of “Legal and Accounting Services”, legal services are separately classified under heading 99821, while “Insolvency and receivership services” are specifically classified under heading 99824, with service code 998241.

The latter covers services including providing advice and operational assistance to the management or creditors of insolvent businesses and acting as a receiver or trustee in bankruptcy.

The Court held that the classification itself demonstrates that insolvency and receivership services constitute a distinct category, separate from legal services.

It further relied on the explanatory notes to the GST classification scheme, which state that where a service can receive differential treatment based on its description, the most specific description should be preferred over a more general description.

The Court referred to Supreme Court decisions including Moorco (India) Ltd. v. Collector of Customs and Commissioner of Commercial Tax, U.P. v. A.R. Thermosets (Pvt.) Ltd., reiterating the settled principle that a specific classification prevails over a general or residuary classification.

The Court’s key reasoning was that GST classification must depend upon the nature of the service actually rendered, rather than the basic professional qualification of the individual rendering it.

It held that when an Advocate renders services as an Insolvency Professional, the individual acts in the capacity of an Insolvency Professional and not as an Advocate providing conventional legal services.

Consequently, it is the role being performed and the corresponding service that determines the GST classification. Such services fall under the specific category of “insolvency and receivership services”, irrespective of the fact that the individual is also an Advocate.

The Court observed that Insolvency Professionals, irrespective of their underlying qualifications, are regulated under the IBC and IBBI Regulations when performing their insolvency functions.

Thus, an Advocate who becomes an Insolvency Professional cannot be placed in a different GST category merely because of his or her Bar Council enrolment.

The Court took note of the stand adopted by the Bar Council of India in its affidavit dated September 6, 2025.

The BCI itself had stated that the functions performed by an Advocate appointed as an IRP or Resolution Professional are significantly different from conventional legal practice. Such functions include managing the affairs of the corporate debtor, inviting claims from creditors, conducting Committee of Creditors meetings, submitting resolution plans and undertaking regulatory compliance.

The BCI consequently took the position that these services did not fall within the reverse charge mechanism applicable to legal services, but were taxable under the forward charge mechanism.

The High Court further noted that the IBBI regulates Insolvency Professionals and can initiate disciplinary proceedings for violations of their professional obligations, even when the Insolvency Professional happens to be an Advocate. Thus, while legal services rendered as an Advocate are governed by the Advocates Act and Bar Council framework, insolvency services rendered in the capacity of an Insolvency Professional are governed by the IBC and IBBI Regulations.

The petitioner had argued that Advocates are permitted under their professional regulatory framework to render legal services, and treating insolvency services as separate could potentially affect their status as Advocates.

The High Court rejected this apprehension.

It noted that Regulation 5(c)(iv)(d) of the IBBI Regulations expressly recognises an Advocate enrolled with the Bar Council as one of the categories eligible to become an Insolvency Professional.

According to the Court, the regulatory framework therefore expressly contemplates Advocates taking up insolvency assignments. Treating insolvency services as a distinct category does not jeopardise an Advocate’s enrolment.

The Court held that the Advocates Act and IBC must be read harmoniously. The IBC provides Advocates with an additional avenue to render specialised services, and this does not derogate from the Advocates Act.

Applying these principles to the case, the Court held that “insolvency and receivership services” are not covered by Notification No. 13/2017-Central Tax (Rate), as amended by the September 25, 2017 corrigendum.

Therefore, the reverse charge mechanism applicable to Advocates providing legal services does not extend to an Advocate acting as an Insolvency Professional.

The Court expressly held that an Advocate acting as an Insolvency Professional is governed by the forward charge mechanism applicable to Insolvency Professionals as a class.

On the facts of the case, the Court noted that the petitioner had been registered as an Insolvency Professional from July 27, 2017 and had been appointed as IRP for the corporate debtor in December 2018. When the dispute arose over his professional fees, he claimed that GST, if payable, was the responsibility of the corporate debtor under reverse charge.

The Court, however, concluded that the IBBI’s March 9, 2021 clarification represented the correct legal position. The petitioner’s challenge to the order was therefore held to be untenable.

The Delhi High Court held that Advocates enrolled with a Bar Council who act as Insolvency Professionals under the IBC are governed by the forward charge mechanism.

Such professionals are consequently required to obtain GST registration and comply with the consequential requirements under the CGST Act, 2017, the rules and applicable notifications, in the same manner as other Insolvency Professionals.

At the same time, the Court carefully limited the scope of its ruling. It clarified that the decision applies only to services rendered by an Advocate in the capacity of an Insolvency Professional.

It does not alter the GST treatment of legal services rendered by the same individual in his or her capacity as an Advocate. Such legal services will continue to be governed by the reverse charge mechanism.

The Court accordingly directed the petitioner to furnish GST-compliant invoices in respect of the professional fees charged for his services as Interim Resolution Professional in the concerned insolvency proceedings and disposed of the writ petition.

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