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: Advocates as Insolvency Professionals Liable for Forward Charge GST
The has held that advocates who serve as insolvency professionals under the must pay Goods and Services Tax (GST) under the , not the applicable to traditional . A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain upheld the order of the , rejecting a petition by advocate who sought to classify his insolvency work as "" exempt from forward charge.
Background of the Dispute
, an advocate enrolled with the since 1995, also qualified as a registered insolvency professional under the IBC. In , the , appointed him as the (IRP) for the Ireo Fiveriver Pvt. Ltd. After raising invoices for his professional fees in , a dispute arose when the appointed later, Mr. K.V. Jain, insisted on GST-compliant invoices. Chaudhary argued that as an advocate, his services were covered by the under , exempting him from GST registration. The NCLT referred the matter to the IBBI, which clarified in that are not under reverse charge, and directed Chaudhary to furnish GST-compliant invoices. Aggrieved, he approached the High Court.
Arguments Before the Court
Chaudhary contended that the IBBI lacked jurisdiction to determine GST applicability, and that advocates are exclusively governed by reverse charge under the GST regime, relying on interim orders of the in J.K. Mittal & Company v. Union of India (2017). He argued that the term "" under Notification No. 13/2017 encompasses all branches of law, including insolvency services, and that treating insolvency work differently would discriminate against advocates and potentially jeopardize their enrolment under the .
The , IBBI, Mr. K.V. Jain, and the jointly opposed the petition. They emphasized that the nature of services rendered by an insolvency professional is fundamentally different from conventional legal practice—involving managerial, administrative, and like managing the ’s affairs, convening creditor meetings, and submitting resolution plans. The BCI, in its affidavit, unequivocally stated that such services are not "" for GST purposes and are taxable under forward charge. The respondents further argued that the Scheme of Classification of Services under GST contains a specific entry for "" (998241), which prevails over the general entry for "" (99821). They relied on the principle that a , citing Moorco (India) Ltd. v. Collector of Customs (1994) and Commissioner of Commercial Tax v. A.R. Thermosets (P.) Ltd. (2016).
Legal Analysis: Nature of Services Determines GST Liability
The court conducted a detailed analysis of the
, the relevant notifications, and the
. It noted that
establishes forward charge as the default rule, while Section 9(3) empowers the government to notify specific services for reverse charge. Notification No. 13/2017, as amended, applies reverse charge only to
"services provided by an individual advocate… by way of
."
The definition of "
" in
is broad, covering advice, consultancy, or assistance in any branch of law. However, the court observed that the
’s Scheme of Classification of Services treats "
" (entry 99821) and "
" (entry 998241) as distinct, co-ordinate categories. The preface to the scheme clarifies that
"where a service is capable of differential treatment… the most specific description shall be preferred over a more general description."
Applying this principle, the court held that when an advocate acts as an insolvency professional, the service rendered is specifically "insolvency and receivership," not general "." The court emphasized that the registration and regulation of insolvency professionals under the IBC constitute a separate, self-contained regime. expressly recognizes advocates among several eligible professional classes, but the certificate of registration is distinct from Bar Council enrolment. Thus, an advocate acting as an insolvency professional is governed by the IBC and , not the .
Key Observations
The court made several pivotal observations, including:
"An Advocate acting as an Insolvency Professional would, therefore, be governed by the ‘ ’, which is applicable to Insolvency Professionals, as a class, and not by the ‘ ’, which is otherwise applicable to Advocates rendering ."
On the classification principle, the court noted:
"The Scheme of Classification… itself demonstrates that ‘ ’ are treated as a distinct category of service, separate from ‘ ’… merely because the person rendering it happens to be enrolled as an Advocate."
The court also addressed the petitioner’s concern about suspension of enrolment, stating:
"Where another statute, such as the IBC and permits Advocates to additionally qualify as Insolvency Professionals, it does not derogate from the … The two statutes… are 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."
The Court’s Decision
The Division Bench dismissed the petition and upheld the IBBI’s order of . It directed Chaudhary to furnish GST-compliant invoices for his professional fees as an interim . The court clarified that its ruling applies only to services rendered by an advocate in the capacity of an insolvency professional; traditional by advocates continue to be governed by reverse charge.
This judgment settles the GST classification for advocates doubling as insolvency professionals, reinforcing that the nature of the service—not the professional’s underlying qualification—determines tax liability. The decision aligns with the IBBI’s longstanding position and the BCI’s own stance, providing much-needed clarity for the growing number of cross-professional insolvency practitioners.
