Delhi High Court: Insolvency Professional’s Services Attract GST Under Forward Charge
The Delhi High Court has held that an advocate who acts as an insolvency professional under the Insolvency and Bankruptcy Code, 2016 (IBC) must pay GST under the forward charge mechanism. The reverse charge that applies to an advocate's legal services does not extend to insolvency work. A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain delivered the ruling on 13 August 2026 in Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India, W.P.(C) 9410/2021.
The Court directed that advocates enrolled with the Bar Council who act as insolvency professionals must obtain GST registration and comply with the CGST Act, 2017, its rules and notifications "in the same manner as is applicable to Insolvency Professionals, as a class". It also made clear that the ruling does not change the reverse charge mechanism for legal services that advocates render in their capacity as advocates.
How the dispute arose
The petitioner, an advocate enrolled with the Bar Council of Delhi and in practice since 1995, has been registered as an insolvency professional since 27 July 2017. On 13 December 2018 the NCLT, Delhi Bench, admitted a Section 9 IBC application filed by Workspace Consulting Pvt. Ltd. in CP(IB) No. 408/2018 and appointed him Interim Resolution Professional (IRP) of Ireo Fiveriver Pvt. Ltd.
- He raised invoices dated 13 August 2019 and 31 October 2019 on the corporate debtor.
- On 17 September 2019 Mr. K.V. Jain was appointed Resolution Professional and took over the assignment.
- As the fees were unpaid, the petitioner filed CA 430/ND/2019 and CA 1268/ND/2020 before the NCLT.
- By email of 6 September 2020, the Resolution Professional asked him to issue GST compliant invoices in place of the earlier invoices.
- On 23 September 2020 the Resolution Professional stated in an affidavit that Rs. 49,04,988 was payable to the petitioner. The NCLT directed payment of the balance and sought a clarification from the IBBI on GST.
By a communication of 9 March 2021, the IBBI stated that "Insolvency and Receivership" services are not covered by reverse charge and asked the petitioner to submit GST compliant invoices for his fee. The writ petition challenged that communication and sought a declaration that services of an advocate under the IBC fall under reverse charge in terms of Section 9 of the CGST Act.
Arguments before the Court
The petitioner argued that the IBBI had no jurisdiction to decide the GST mechanism, that "legal service" covers services of any kind in any branch of law, and that the Bar Council of India Rules allow an advocate to render only legal services. The GST department argued that taxability depends on the nature of the service and not on the professional status of the supplier. It said an IRP manages the affairs of the corporate debtor, invites claims and conducts committee of creditors meetings, which are administrative functions and not the practice of law. The Bar Council of India, in an affidavit of 6 September 2025, took the same view: advocates acting as insolvency professionals pay GST under forward charge.
Why reverse charge does not apply
| Point | What the Court found |
|---|---|
| Default rule | Section 9(1) of the CGST Act makes the supplier liable (forward charge). Reverse charge applies only to supplies notified under Section 9(3). |
| Notification No. 13/2017-Central Tax (Rate) | Reverse charge covers legal services by an individual advocate or a firm of advocates to a business entity. "Legal service" means advice, consultancy or assistance in any branch of law. Insolvency and receivership services are not listed. |
| Scheme of Classification of Services | Insolvency and receivership services sit under a separate sub-head, 99824 (entry 998241), distinct from legal services under 99821. The specific entry prevails over the general one. |
| Role, not qualification | When an advocate acts as an insolvency professional, that role decides the nature of the service, not the person's underlying registration. |
| Regulatory regime | Insolvency professionals are a distinct class governed by the IBC and IBBI Regulations. Misconduct in that role is dealt with by the IBBI, not the Bar Council. |
The Court noted that of 4,558 registered insolvency professionals as of 30 June 2025, only 283 were advocates, less than 6 per cent. It held there can be no different tax treatment within the class of insolvency professionals merely because some of them are also advocates. It concluded that the IBBI communication of 9 March 2021 "reflects the correct position in law" and directed the petitioner to furnish GST compliant invoices for his fee as IRP in CP(IB) No. 408/2018.
No need to suspend Bar enrolment
The petitioner had argued that treating insolvency work as distinct from legal services would force advocates to suspend their enrolment. The Court rejected this. Regulation 5 of the IBBI (Insolvency Professionals) Regulations, 2016 expressly lists an "Advocate enrolled with the Bar Council" as an eligible category for registration. The IBC framework "does not derogate from the Advocates Act, 1961" and offers another stream of specialised work. An advocate can hold both roles, but for insolvency assignments is governed by the IBC and IBBI Regulations.
What advocates, IPs and corporate debtors should do now
- Advocates acting as IRP, RP or liquidator: obtain GST registration, charge GST on the fee invoice and file returns as any other insolvency professional does.
- Separate the two capacities: legal services continue under reverse charge, so engagement letters, invoices and books should show clearly which fees relate to the insolvency assignment.
- Corporate debtors and resolution professionals: do not self-assess reverse charge on an IRP's fee because the appointee is an advocate. Ask for a GST compliant tax invoice, as the IBBI and the Court required in this case.
- Past assignments: review earlier insolvency fees that were billed as legal services under reverse charge, case by case, with reference to the capacity in which the work was done.
Updated on 28 September 2026: added the case number, bench and date, the facts of the Ireo Fiveriver CIRP, the parties' arguments, the classification reasoning, the Court's final directions and a link to the official Delhi High Court judgment.
