TaxTMI 
TaxTMI 
2026 (8) TMI 862
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....receivership services' are not covered under the reverse charge mechanism and thereby, the Petitioner was directed to submit Goods and Services Tax (hereinafter, 'GST') compliant invoices towards the professional fees charged by him in the capacity of an interim resolution professional. I. Factual Background 4. The background of the present case is that, Mr. Kanwal Chaudhary, is an Advocate registered with the Bar Council of Delhi and has been practising law since 1995. 5. Upon the enactment of the Insolvency and Bankruptcy Code, 2016 (hereinafter, 'the IBC'), the Petitioner decided to take the 'Limited Insolvency Examination' in order to be recognised and registered as an Insolvency Professional. The Petitioner qualified in the said examination, and is stated to have been registered as an Insolvency Professional since 27th July, 2017. 6. On 13th December, 2018, the NCLT, Delhi Bench, while admitting an application under Section 9 of the IBC, filed by Workspace Consulting Pvt. Ltd. in CP(IB) No. 408/2018, appointed the Petitioner as an Interim Resolution Professional for the Corporate Debtor i.e., Ireo Fiveriver Pvt. Ltd. 7. The Petitioner in his role as the Interim ....
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....e relevant portion of the order dated 7th October, 2020 is set out below: "IA No. 430/ND/2019 along with IA No. 1268/ND/2020 These two applications filed by erstwhile IRP seeking directions with respect to payment of the expenses incurred and the fees of erstwhile IRP. Mr. Chaudhary, Learned Counsel appearing for the erstwhile IRP states that there are two memos submitted to Resolution Professional against which the payment was not made. Mr. Deora, Learned Counsel for the Resolution Professional states that they have filed reply and out of total amount of Rs. 77,07,907 /-, after verification, total of Rs. 28,02,919/- has already been paid thus leaving a balance of Rs. 49,04,988/-. Resolution Professional is directed to disburse the balance amount to the erstwhile IRP of Rs. 49,04,988/-within three days. At this stage, it is* mentioned that a clarification is required with respect to payment of GST by parties. The same can be referred to IBBI for clarification. With this direction, applications are disposed of." 15. As is evident from the above order passed by the NCLT, a clarification was sought from the IBBI, as to who is liable to deposit th....
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....r, 2021, whereby the impugned order dated 9th March, 2021 was stayed. 19. The said interim order was made absolute during the pendency of the present petition, vide order dated 17th August, 2022. 20. On 29th January, 2025, this Court noted that pleadings in the matter stood completed and directed that the matter be listed for hearing. 21. Pursuant thereto, the matter was listed from time to time. On 24th July, 2025, this Court directed the Bar Council of India to place its stand before the Court. 22. Thereafter, the submissions on behalf of the Petitioner were concluded on 10th September, 2025. The matter was taken up for final hearing on 9th July, 2026. 23. On the said date, arguments on behalf of the Respondents were concluded and the judgment was reserved. III. Submissions on behalf of the parties a) Submissions on behalf of the Petitioner 24. Mr. Rajat Navet, ld. Counsel for the Petitioner has made the following submissions: (i) At the outset, it is stated that the impugned order is passed without any jurisdiction, as the IBBI is not the competent authority to determine the applicability of 'forward charge mechanism' to Advocates acting as Insol....
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....vocates, law firms, LLPs of Advocates would be governed by 'reverse charge mechanism', unless such individual/firm wants to take advantage of the Input Tax Credit and seeks to continue with the voluntary registration under Section 25 (3) of the CGST Act. (v) Since the notifications, as well as the orders dated 12th July, 2017 and 18th July, 2017 passed in W.P.(C) No. 5709/2017, make it abundantly clear that Advocates are covered only under the 'reverse charge mechanism', the impugned order would, therefore, be contrary thereto. (vi) That though other classes of professionals may also be providing Insolvency Professional Services, so far as Advocates registered with the Bar Council are concerned, they cannot be treated differently from other Advocates, if they provide insolvency professional services - failing which it would be discriminatory. (vii) Further, it is also stated that Chartered Accountants and other professionals are generally governed by the 'Forward Charge Mechanism' for GST, whereas Advocates are governed by the 'Reverse Charge Mechanism'. In terms thereof, there cannot be said to be any discrimination between these two separate classes of ....
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....ed 6th September, 2025, on behalf of the Bar Council of India (hereinafter, 'BCI') to contend that whenever an Advocate is appointed as an Insolvency Professional, the nature of services is different from conventional legal services. (ii) In the said affidavit, the BCI has categorically taken a position that the Advocate as an Insolvency Professional would be liable to pay GST under the 'forward charge mechanism' and cannot claim benefit under the 'reverse charge mechanism', which is applicable to traditional legal services. (iii) It is also stated that the IBBI regulations clearly prescribes the manner in which an Insolvency Professional is required to be registered. In this regard, reliance is placed upon Regulations 7, 7(2)(h), and 10 of the IBBI regulations. (iv) That when an Advocate acts in the capacity of an Insolvency Professional, they are governed by the provisions of Insolvency and Bankruptcy Code, 2016 (hereinafter, 'IBC') and the rules and regulations framed thereunder, and not by the Bar Council of India Rules. A distinction is, therefore, required to be drawn based on the nature of services. (v) It is emphasized that, under the GST....
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....15 224 2439 Member of ICSI 602 139 741 Member of ICMAI 186 19 205 Member of Bar Council 238 35 283 Managerial Experience 724 37 761 PGIP Qualified 40 6 46 Total 4005 460 4558 (ii) It is emphasised that any person seeking recognition and registration as an Insolvency Professional is required to qualify the Limited Insolvency Examination conducted by the IBBI. It is only upon successfully clearing the said qualifying examination, that a person can be recognised and permitted to render services as an Insolvency Professional, and that persons who do not qualify the examination are ineligible to render such services. (iii) In this regard, it is contended that services provided by an interim resolution professional are not specific to Advocates. Even other professionals can provide such services. Advocates may provide services as an interim resolution professional. However, all Advocates may not provide services as an Insolvency Professional, unless they are eligible and qualified. (iv) Further, it is stated that Insolvency Professionals are regulated under the IBC. It is also stated ....
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....IBBI regulations makes it clear that continued enrolment as an Advocate is not mandatory, so long as the requirement of ten years' cumulative practice, as an Advocate, has been fulfilled. It is further contended that, at the stage, when a person seeks to appear for the qualifying examination or obtain registration as an Insolvency Professional, he or she is not required to be a practising Advocate. (iii) Furthermore, it is stated that the certificate of registration/licence granted by the IBBI to the Insolvency Professional is distinct from, and independent of, the enrolment granted by the Bar Council to the Advocates, and that the two operate in separate fields. (iv) Finally, it is highlighted that the preface to the Scheme of classification of services itself makes it clear that when there is a specific description, the same would be preferred over a general description. Therefore, the Insolvency Professionals ought to be governed under the specific entry-998241, and not under the general entry 99821, in the scheme of classification. e) Submissions of behalf of BCI 28. Mr. Preetpal Singh, ld. Counsel appearing for the BCI, places reliance upon the affidavi....
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....ard charge mechanism', and is the default rule. Thus, the supplier has to include the GST component, at the time of raising the invoice, in the invoice itself. The liability to pay the GST is thus of the supplier. 38. However, Section 9(3) of the CGST Act, empowers the Government acting on the recommendations of the GST Council, to notify specific categories of supply of goods or services, in respect of which the tax shall be paid by the recipient, i.e., where the recipient is the person liable to pay tax under the CGST Act. Is respect of such categories, the tax is paid or liable to be paid on reverse charge basis, and the responsibility of paying the tax shifts from the supplier, to the recipient of such goods and services. 39. In order to determine the GST payment mechanism applicable to Advocates, it would be necessary to examine the relevant statutory notifications and judicial decisions interpreting the same. 40. Insofar as Advocates are concerned, two notifications are relevant to determine the manner in which GST is paid, namely: (i) Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 issued by the Government of India, Ministry of Finance (De....
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....central tax leviable under Section 9 of the CGST Act is payable on 'reverse charge basis'. 45. The aforesaid Notifications also came to be considered by a Coordinate Bench of this Court in W.P. (C) 5709/2017, wherein a challenge was raised to various notifications issued under the GST regime, including Notification No. 13/2017-Central Tax (Rate). 46. The principal contention of the Petitioners therein was that legal services, as a whole, were liable to GST only under the 'reverse charge mechanism', in terms of the recommendations of the GST Council. It was, accordingly, contended that Notification No. 13/2017-Central Tax (Rate), insofar as it restricted the categories of legal services covered under the 'reverse charge mechanism', was arbitrary and violative of the rights of Advocates. While considering the said challenge, the Division Bench vide order dated 12th July, 2017 observed as under: "[...]14. In view of the above submissions it is plain that as of date there is no clarity on whether all legal services (not restricted to representational services) provided by legal practitioners and firms would be governed by the reverse charge mechanism. If in fact all lega....
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....ce with any legal requirement under the CGST, DGST, or IGST Act; and (ii) Any advocate, law firm of advocates, LLPs of advocates who are providers of legal services, who have registered under the CGST, DGST, or IGST Act from 1st July, 2017 will not be denied the benefit of this interim order. (iii) In view of the Press Release issued by the Ministry of Finance as shown to the Court today, and the instructions given to Mr. Narula to the effect that the legal position that existed under the Finance Act, 1994 as regard legal services being amenable to service tax under the reverse charge mechanism continuing even under the CGST, DGST or IGST Acts, till further orders, all legal services provided by advocates, law firms of advocates, or LLPs of advocates will be continued to be governed by the reverse charge mechanism unless of course any such legal service provider wants to take advantage of input tax credit and seeks to continue with the voluntary registration under Section 25 (3) of the CGST Act and the corresponding provisions of IGST or DGST Act." 49. Thereafter, the issue in respect of Advocates being governed by the 'reverse charge mechanism' was clarified b....
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....017 of 2017 titled as Legalence IP Corp LLP vs. UOI & Ors., pending at High Court of Delhi at New Delhi and Writ Petition (T) No. 274 of 2017 titled as M/s Lexloft Legal Advisory LLP & Anr. vs. UOI & Ors, pending at High Court of Chhattisgarh be transferred to this Court. Ordered accordingly. After transfer of the above-mentioned cases, the Registry is directed to register them as transferred cases." 52. Thus, the position that enures as on date, from the aforesaid notifications, the orders dated 12th July, 2017 and 18th July, 2017, and corrigendum dated 25th September, 2017, is that services rendered by Advocates are governed by 'reverse charge mechanism', for the purposes of payment of GST. B. The GST payment mechanism applicable to Insolvency Professionals 53. Insofar as Insolvency Professionals are concerned, it would be necessary to first examine the statutory framework under the IBC and the IBBI regulations, before considering the applicable GST mechanism. 54. The IBC was enacted in 2016, with effect from 28th May, 2016. Under the IBC, Insolvency Professionals are defined under Section 3(19), which reads as under: "(19) "insolvency professional" ....
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....bye-laws of the insolvency professional agency of which he is a member; (c) to allow the insolvency professional agency to inspect his records; (d) to submit a copy of the records of every proceeding before the Adjudicating Authority to the Board as well as to the insolvency professional agency of which he is a member; and (e) to perform his functions in such manner and subject to such conditions as may be specified." 58. As per Section 240 of the IBC, the IBBI can frame regulations in order to carry out the provisions of IBC. In terms of the power granted under Section 240, the IBBI regulations have been framed. 59. The IBBI regulations stipulate the eligibility criteria, qualifications and experience, registration and recognition of the Insolvency Professionals. The IBBI regulations have been analysed in detail, in the next section. 60. The IBC and IBBI regulations provide a comprehensive statutory framework to regulate Insolvency Professionals. It is evident from the aforesaid statutory scheme that an Insolvency Professional is subject to distinct and self-contained regulatory regime. 61. Having regard to the aforesaid statutory framework, ....
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....y Professionals is prescribed in the IBBI Regulations. 70. Regulation 3 of the IBBI regulations is set out below: "CHAPTER II INSOLVENCY EXAMINATIONS 3. (1) The Board shall, either on its own or through a designated agency, conduct a 'National Insolvency Examination' in such a manner and at such frequency, as may be specified, to test the knowledge and practical skills of individuals in the areas of insolvency, bankruptcy and allied subjects. (2) The Board shall, either on its own or through a designated agency, conduct a 'Limited Insolvency Examination' to test the knowledge and application of knowledge of individuals in the areas of insolvency, bankruptcy and allied subjects. (3) The syllabus, format, qualifying marks and frequency of the Limited Insolvency Examination shall be published on the website of the Board at least three months before the examination." 71. Regulation 4 of the IBBI Regulations provides as under: "CHAPTER III REGISTRATION OF INSOLVENCY PROFESSIONALS Eligibility. 4. (1) No individual shall be eligible to be registered as an insolvency professional if he- (a) is a minor; (b) is not a per....
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....y after his enrolment as a professional member; and (c) has- (i) successfully completed the National Insolvency Programme, as may be approved by the Board; (ii) successfully completed the Graduate Insolvency Programme, as may approved by the Board; (iii) experience of - (a) ten years in the field of law, after receiving a Bachelor's degree in law; (b) ten years in management, after receiving a Master's degree in Management or two-year full time Post Graduate Diploma in Management; or (c) fifteen years in management, after receiving a Bachelor's degree, from a university established or recognised by law or an Institute approved by All India Council of Technical Education; or (iv) ten years' of experience as - (a) chartered accountant registered as a member of the Institute of Chartered Accountants of India, (b) company secretary registered as a member of the Institute of Company Secretaries of India, (c) cost accountant registered as a member of the Institute of Cost Accountants of India, or (d) advocate enrolled with the Bar Council." 76. A perusal of the Regul....
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..... 82. In fact, Advocates form only a small sub-set of the large number of persons, who can qualify themselves as Insolvency Professionals. 83. This is further borne out by the statistical data placed on behalf of the ld. Counsel for the IBBI, which is extracted hereinabove. The said chart reveals that out of the 4,558 Insolvency Professionals registered as on 30th June, 2025, only 283 persons are Advocates registered with the Bar Council i.e., less than 6%. Thus, Advocates constitute a small fraction of the persons who can act as Insolvency Professionals. (II) Insolvency Professionals as a distinct statutory class 84. Insolvency Professionals as a class discharge functions in terms of Section 17 (Management of affairs of corporate debtor by interim resolution professional), Section 18 (Duties of interim resolution professional), and Section 25 (Duties of resolution professional) of the IBC, and are regulated by the IBBI Regulations, which prescribes a specific code for them. 85. Further, as discussed in the preceding section, Sections 207 and 208 of the IBC prescribe the statutory framework governing the qualifications and professional obligations of Insolvency Profe....
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....ookkeeping services xxx 998221 Financial auditing services xxx 998222 Accounting and bookkeeping services xxx 998223 Payroll services xxx 998223 Other similar services n.e.c xxx 99823 Tax consultancy and preparation services 998231 Corporate tax consulting and preparation services xxx 998232 Individual tax preparation and planning services xxx 99824 Insolvency and receivership services 998241 Insolvency and receivership services This service code includes providing advice and operational assistance to the management and/or creditors of insolvent businesses and/or acting as receiver or trustee in bankruptcy" 90. A perusal of the above heads would show that insofar as the Insolvency Professionals are concerned, the services rendered by them i.e., 'insolvency and receivership services' are specifically covered under the head - 998241. 91. Furthermore, the broad head 982 -'Legal and Accounting Services' - is itself sub-divided into four distinct and mutually exclusive service codes. Legal services under 99821 are exhaustively enu....
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....urt was whether components and accessories of a volumetric flow meter were classifiable under the specific Customs Tariff Heading 90.24 (instruments for measuring flow) or the general residuary Heading 90.26 (production or calibrating meters). The Court observed that a specific heading of classification would prevail over a general heading. The observations of the Supreme Court are as under: "....The primary question, therefore, is whether the goods manufactured by the appellant fall in clause (a) as if it can be classified with reference to (a) then clauses (b) and (c) would not apply. Clause (a) incorporates the common and general principle that the goods which can be classified specifically with reference to any heading should be placed in that category alone. The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries t....
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....exclude some type or variety of bitumen. All bitumen products, which share and have common composition and commercial entity, and meet the popular parlance test, is, therefore, meant to be covered by the said Entry. In the instant case, even the end use test is satisfied. There is nothing in the Entry to suggest and show that the Entry is required to be given a restrictive and a narrow meaning. 22. In this regard, another aspect needs to be noted. The Revenue does not rely upon another Entry under which bitumen emulsion can be taxed. The Revenue relies upon the residuary Entry which would only include goods, which cannot be covered under any other Entry in the schedule on application of the three-fold criteria. In the State of Maharashtra v. Bradma of India Limited, the Court had observed that the general principle is that specific Entry would override a general Entry. Referring to the decisions in the case of Collector of Central Excise, Shillong v. Wood Craft Products Ltd., it has been ruled that resort can be made to a residuary heading only when by liberal construction the specific Entry cannot cover the goods in question. Referring to Entry No. 90 in the said case, wh....
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.... such as managing the affairs of the corporate debtor, inviting claims from creditors, convening and conducting meetings of the Committee of Creditors, submitting resolution plans, and other regulatory compliance tasks under the IBC. 7. Hence, such services do not fall within the scope of the reverse charge mechanism under Entry No. 2 of Notification No. 13/2017, but are instead taxable under the forward charge mechanism applicable to professional or management services. 8. The Insolvency and Bankruptcy Board of India (hereinafter "IBBI"), which is the regulatory authority under the IBC, has consistently held the position that IRPs are to be treated as professionals providing management or consultancy services, and are therefore liable to pay Goods and Services Tax (GST) under the forward charge mechanism. 9. The Central Board of Indirect Taxes and Customs (hereinafter "CBIC") has issued clarifications through frequently asked questions (FAOs) and circulars indicating that the taxability of service under the reverse charge or forward charge mechanism depends on the actual nature of the service rendered. When a professional, even if an advocate, provides s....
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....ressly recognises an "Advocate enrolled with the Bar Council" as one among several distinct categories of professionals to be eligible for registration as an Insolvency Professional. 102. Thus, when the IBBI Regulations themselves recognise that an Advocate enrolled with the Bar Council is eligible to be registered as an Insolvency Professional. Far from restricting or disqualifying Advocates from undertaking such registration, the said regulation expressly contemplates and facilitates Advocates to take up this role. The Petitioner's apprehension, that treating insolvency and receivership services as distinct from legal services would jeopardise an Advocate's enrolment, cannot be sustained where the legislative and regulatory intent, as reflected in said regulation, is to permit and enable Advocates to render services as Insolvency professionals. 103. Where another statute, such as the IBC and IBBI 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. Such services may be connected with law,....
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....erefore, be governed by the 'forward charge mechanism', which is applicable to Insolvency Professionals, as a class, and not by the 'reverse charge mechanism', which is otherwise applicable to Advocates rendering legal services. 111. The facts of the present case are not in dispute. The Petitioner herein is an Advocate, registered with the Bar Council of Delhi since 1995. He was registered as an Insolvency Professional on 27th July, 2017, and appointed as an interim resolution professional for the Corporate Debtor, i.e., Ireo Fiveriver Pvt. Ltd., vide NCLT order dated 13th December, 2018. A dispute arose over the release of his professional fees as an interim resolution professional, in the course of which he was called upon to raise GST compliant invoices. The Petitioner contended that he stood exempted, and that GST, if payable, was payable by the Corporate Debtor on a 'reverse charge basis'. The NCLT referred the issue to the IBBI, which, vide the impugned order dated 9th March, 2021, observed that 'Insolvency and Receivership' services are not covered under the 'reverse charge mechanism', and directed the Petitioner to furnish GST compliant invoices. 112. The impugned ord....