Facts of the Case:
In this case, the petitioner Mr. Kanwal Chaudhary, an Advocate enrolled with the Bar Council of Delhi challenged the order passed by the Insolvency and Bankruptcy Board of India (IBBI). The Petitioner had qualified the Limited Insolvency Examination and was registered as an Insolvency Professional on 27 July 2017. Subsequently, by order dated 13 December 2018, the NCLT, Delhi Bench, appointed him as the Interim Resolution Professional (IRP) for a private limited company in proceedings initiated under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC).
While acting as IRP, the Petitioner raised invoices dated 13 August 2019 and 31 October 2019 towards his professional fees. Upon examination of the Petitioner’s invoices, the Resolution Professional informed him that he was required to furnish GST-compliant invoices. The Petitioner disputed this requirement, contending that, being an Advocate, the services rendered by him were covered under the Reverse Charge Mechanism (RCM) in terms of Section 9(3) of the CGST Act read with Notifications Nos. 12/2017-Central Tax (Rate) and 13/2017-Central Tax (Rate), and therefore he was neither required to obtain GST registration nor discharge GST himself.
The dispute was placed before the NCLT, which by order directed payment of the outstanding amount of ₹49,04,988 to the Petitioner but sought clarification regarding the person liable to pay GST on his professional fees. The matter was consequently referred to the IBBI. The IBBI held that “Insolvency and Receivership” services were not covered under the Reverse Charge Mechanism and directed the Petitioner to furnish GST-compliant invoices for the professional fees charged by him in his capacity as an IRP. Aggrieved by the said decision, the Petitioner approached the High Court, contending that since he was an Advocate, the services rendered by him as an Insolvency Professional should also be treated as legal services liable to GST under RCM.
Issue:
Whether an Advocate enrolled with the Bar Council, while acting as an Insolvency Professional/Interim Resolution Professional under the IBC, is liable to pay GST under the Forward Charge Mechanism (FCM) applicable to Insolvency Professionals, or whether such services continue to be covered by the Reverse Charge Mechanism applicable to legal services rendered by Advocates.
Held that:
The Court observed that Section 9(1) of the CGST Act lays down the general rule that GST is payable by the supplier, whereas Section 9(3) provides for RCM only in respect of specifically notified categories of supplies. Although services rendered by Advocates as legal services are covered under RCM pursuant to Notification No. 13/2017-Central Tax (Rate), services rendered by an Insolvency Professional are not included in the notified categories liable to RCM. Therefore, the general rule of forward charge applies to services supplied by an Insolvency Professional.
The Court further held that an Insolvency Professional constitutes a distinct statutory class, governed by the IBC and the IBBI Regulations. The fact that an individual happens to possess an additional qualification or is enrolled as an Advocate does not change the nature of the services rendered by him as an Insolvency Professional. When an Advocate is appointed as an IRP or Resolution Professional, he performs statutory functions such as managing the affairs of the Corporate Debtor, inviting and collating claims, conducting meetings of the Committee of Creditors and performing other functions prescribed under the IBC. Such functions are distinct from conventional legal advice, consultancy or representation provided by an Advocate.
A significant basis for the Court’s conclusion was the GST Scheme of Classification of Services. While “Legal Services” are classified under heading 99821, “Insolvency and Receivership Services” are specifically classified under 998241. The Court held that the specific classification of insolvency and receivership services must prevail over the general classification of legal services. Applying the settled principle that a specific entry prevails over a general entry, the Court concluded that insolvency services cannot be treated as legal services merely because the person providing them is an Advocate.
The Court accordingly held that the capacity in which the service is rendered, and not merely the professional qualification of the service provider, determines the applicable GST mechanism. Thus, when the Petitioner rendered services as an Insolvency Professional, he was functioning under the IBC and IBBI Regulations and was providing “Insolvency and Receivership Services”. Such services were therefore liable to GST under the Forward Charge Mechanism and were not covered by the RCM applicable to legal services provided by Advocates. The Court also rejected the contention that treating insolvency services separately from legal services would affect the Petitioner’s status as an Advocate. It noted that the IBBI Regulations themselves expressly recognise an Advocate enrolled with the Bar Council as an eligible category for registration as an Insolvency Professional. Accordingly, the Advocates Act and the IBC can operate harmoniously: an Advocate may also function as an Insolvency Professional, but the services rendered in the latter capacity are governed by the statutory framework applicable to Insolvency Professionals.
The Court, however, specifically clarified that the ruling is confined to services rendered in the capacity of an Insolvency Professional. It does not alter the GST treatment of legal services rendered by the same person in his capacity as an Advocate. Such legal services continue to be governed by the Reverse Charge Mechanism.
Case name: Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India dated 13.08.2026
Citation No. 2026 Taxo.online 2426
