Delhi High Court: In a petition challenging the Insolvency and Bankruptcy Board of India’s (IBBI) clarification on the applicability of GST to services rendered by an Insolvency Professional, a Division Bench of Prathiba M. Singh* and Shail Jain, JJ., held that an advocate acting as an Insolvency Professional under the Insolvency and Bankruptcy Code, 2016 (IBC) is liable to discharge GST under the forward charge mechanism.
The Court observed that while legal services rendered by advocates are ordinarily covered by the reverse charge mechanism under Section 9(3), Central Goods and Services Tax Act, 2017 (CGST Act), services rendered by an Insolvency Professional constitute a distinct category of “insolvency and receivership services” and are not covered by the notification governing legal services. The Court further held that it is the capacity in which the service is rendered, and not the professional qualification of the individual, that determines the applicable GST regime. Accordingly, an advocate rendering services as an Insolvency Professional cannot claim the benefit of the reverse charge mechanism applicable to advocates rendering legal services and is required to obtain GST registration and issue GST-compliant invoices. Consequently, the Court upheld the IBBI’s clarification dated 9 March 2021 and dismissed the petition
Background
The petitioner, an advocate registered with the Bar Council of Delhi and practising since 1995, qualified the Limited Insolvency Examination under the Insolvency and Bankruptcy Code, 2016 and was registered as an Insolvency Professional on 27 July 2017. On 13 December 2018, the National Company Law Tribunal (NCLT), Delhi Bench, appointed him as the Interim Resolution Professional (IRP) of Ireo Fiveriver (P) Ltd. in insolvency proceedings initiated under Section 9 IBC. During his tenure as IRP, the petitioner raised invoices dated 13 August 2019 and 31 October 2019 towards his professional fees. Subsequently, on 17 September 2019, K.V. Jain was appointed as the Resolution Professional and took over the assignment.
As the petitioner’s professional fees remained unpaid, he approached the NCLT seeking directions for release of the outstanding amount. The NCLT, on 1 September 2020, directed the Resolution Professional to examine the invoices and determine the contribution payable by the Committee of Creditors. The Resolution Professional thereafter insisted that the petitioner furnish GST-compliant invoices. The petitioner, however, contended that he was not liable to obtain GST registration and that the GST, if payable, was liable to be discharged by the corporate debtor under the reverse charge mechanism, relying upon Sections 9(3) and 9(4), CGST Act and the relevant notifications issued thereunder. The Resolution Professional maintained his demand for GST-compliant invoices and subsequently informed the NCLT that an amount of ₹49,04,988 was payable to the petitioner.
By order dated 7 October 2020, the NCLT directed payment of the said amount to the petitioner but sought clarification from the Insolvency and Bankruptcy Board of India (IBBI) regarding the person liable to discharge the GST liability. Pursuant thereto, the IBBI issued the impugned clarification dated 9 March 2021, holding that services rendered by an Insolvency Professional in the nature of “Insolvency and Receivership” were not covered under the reverse charge mechanism. Consequently, the IBBI held that the petitioner, being the IRP, was required to furnish GST-compliant invoices and discharge the applicable GST liability. Aggrieved by the said clarification, the petitioner approached the High Court challenging the decision of the IBBI.
Analysis
The Court examined the issue in three stages:
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the GST payment mechanism applicable to advocates;
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the mechanism applicable to Insolvency Professionals; and
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the position of advocates who act as Insolvency Professionals.
The Court observed that under Section 9(1), CGST Act, the forward charge mechanism is the default rule, under which the supplier is liable to discharge GST. However, Section 9(3) empowers the Government to notify specified categories of services where the recipient is liable to pay tax under the reverse charge mechanism. On a conjoint reading of Notification No. 12/2017-Central Tax (Rate) and Notification No. 13/2017-Central Tax (Rate), as clarified by the corrigendum dated 25 September 2017, the Court held that services rendered by advocates, by way of legal services, are governed by the reverse charge mechanism.
Insofar as Insolvency Professionals are concerned, the Court noted that they constitute a distinct statutory class governed by the IBC and the IBBI Regulations. Although the services rendered by Insolvency Professionals fall within the broad category of “legal and accounting services”, the specific service rendered is “insolvency and receivership services”, classified under service code 99824. Such services are separately and specifically classified and are not covered by the legal services specified under Notification No. 13/2017-Central Tax (Rate). Accordingly, the Court held that the default rule under Section 9(1), CGST Act would apply and services rendered by an Insolvency Professional are governed by the forward charge mechanism.
The Court thereafter considered whether an advocate, while acting as an Insolvency Professional, would continue to enjoy the reverse charge mechanism applicable to advocates. It held that the capacity in which the service is rendered, and not the underlying professional qualification or registration of the individual, is determinative. An advocate acting as an Insolvency Professional renders “insolvency and receivership services” and acts in a capacity governed by the IBC and the IBBI Regulations. The Court emphasised that Insolvency Professionals constitute a distinct statutory class, and there cannot be any distinction in the manner in which such professionals are treated merely because an individual happens to be an advocate. The Court also took note of statistical data placed on record by the IBBI, which showed that of the 4,558 Insolvency Professionals registered as on 30 June 2025, only 283, less than 6 percent, were Advocates registered with the Bar Council. The Court observed that this data further supported the conclusion that Advocates constitute only a small subset of the larger class of Insolvency Professionals, and could not, for that reason, claim differential GST treatment merely on account of their underlying professional qualification. Therefore, the reverse charge mechanism applicable to Advocates rendering legal services cannot be extended to services rendered by them as Insolvency Professionals.
The Court further held that the Advocates Act, 1961 and the IBC are required to be read in a harmonious manner. The fact that an advocate is permitted under the IBBI Regulations to additionally qualify and act as an Insolvency Professional does not derogate from the Advocates Act. However, to the extent that an advocate renders services as an Insolvency Professional, such services are governed by the IBC and the IBBI Regulations and not by the regulatory regime otherwise applicable to advocates. Thus, the Court held that the GST regime applicable to Insolvency Professionals would apply irrespective of the basic professional qualification of the person concerned.
Decision
Accordingly, the Court held that advocates enrolled with the Bar Council who act as Insolvency Professionals under the IBC are governed by the forward charge mechanism and are liable to obtain GST registration and comply with the consequential requirements under the CGST Act. However, this direction is confined to services rendered by an advocate in the capacity of an Insolvency Professional and does not alter the reverse charge mechanism applicable to legal services rendered by such person in the capacity of an advocate. The Court, therefore, found the IBBI’s clarification dated 9 March 2021 to reflect the correct position in law and dismissed the challenge to the impugned order. The petitioner was consequently directed to furnish GST-compliant invoices in respect of the professional fees charged for services rendered as Interim Resolution Professional.
[Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India, W.P.(C) 9410 of 2021, decided on 13-8-2026]
*Judgment authored by: Justice Prathiba M. Singh
Advocates who appeared in this case:
For the Petitioner: Rajat Navet, Kushagra Pandit and Rajat Rana, Advocates
For the Respondent: K.V. Jain, RP, Ashish Verma, Nikhil Thakur, Kriti, Pulkit Deora, Sagar Pathak, Vinamra Kothari, Ajay Kumar Agarwal, Ruchesh Sinha, SSC, CGST with Upasna Vashistha, Preetpal Singh, Simran Kumari and Pooja, Advocates