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Informist, Thursday, Aug. 13, 2026

 

NEW DELHI – The Delhi High Court Thursday held that advocates who are acting as insolvency professionals are governed under forward charge mechanism and hence liable to pay Goods and Services Tax for supplying services in the insolvency proceedings of debt-ridden companies. These advocates shall be liable to obtain GST registration, and comply with all consequential requirements under the Central Goods and Services Tax Act, 2017 and the rules and notifications framed thereunder, in the same manner as is applicable to insolvency professionals, as a class, said the high court.

 

The court clarified that its direction shall apply only insofar as services rendered by an advocate in the capacity of an insolvency professional is concerned, and shall not, in any manner, affect or alter the GST payment mechanism otherwise applicable to advocates, in respect of legal services rendered by them in their capacity as lawyers, which shall continue to be governed by the "reverse charge mechanism", which means the litigants engaging lawyers have to pay GST. The high court asked the petitioner Kanwal Chaudhary, who was the interim resolution professional of Ireo Fiveriver Pvt. Ltd., to furnish GST compliant invoices, in respect of the professional fee charged him for services rendered in the insolvency proceedings.

 

A Bench of Justice Prathiba M. Singh and Justice Shail Jain said where another statute, such as the Insolvency and Bankruptcy Code, 2016 and Insolvency and Bankruptcy Board of India regulations permits advocates to additionally qualify as insolvency professionals, it does not derogate from the Advocates Act, 1961. It merely offers another stream or opportunity for advocates to render more specialised and niche services, said the Bench. Such services may be connected with law, however, this would not mean that advocates shall, for that reason, always be governed by the Advocates Act, 1961 and the Bar Council of India rules, since there is a separate regulatory mechanism for insolvency professionals as a class, it said.

 

The two statutes, namely, the Advocates Act and the Insolvency and Bankruptcy Code, are accordingly required to be read in a harmonious manner, so as not to curb or curtail the growth of advocates into other areas of rendering services, so long as the same is recognised by law, said the court. An advocate can also render service as an insolvency professional, as the same is statutorily permitted, said the court. However, to the extent that they render such services, such persons would be governed by the Insolvency and Bankruptcy Code and Insolvency and Bankruptcy Board of India regulations, and not by the regime otherwise applicable to advocates, said the court.

 

There cannot be any distinction in the manner in which insolvency professionals as a class are treated, said the court. Thus, even where the insolvency professional happens to be an advocate, the tax regime applicable to services rendered as an insolvency professional would be that which applies to insolvency professionals, and not that which applies to advocates, said the court.

 

The high court noted the Bar Council of India's submission that the nature of services rendered by an advocate, acting as an insolvency professional was significantly distinct from conventional legal services, and thereby, does not attract reverse charge mechanism. The Bar Council of India has further affirmed that such services, being in the nature of managerial and professional services, would accordingly, be governed by the "forward charge mechanism", said the court.

 

The petitioner had given its invoices to the resolution professional of Ireo Fiveriver after his services were over. However, the resolution professional asked him to give GST complaint invoices. The National Company Law Tribunal while directing the payment sought by the petitioner, demanded clarification on who would pay the GST. The bankruptcy board said the petitioner was liable to pay GST, challenging which Chaudhary moved the high court.  End

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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