The Delhi High Court has clarified that advocates serving as insolvency professionals are required to obtain separate GST registration, delineating their legal and insolvency roles with distinct tax treatments.
The Delhi High Court has held that advocates who also act as insolvency professionals must take separate GST registration for those services, drawing a clear line between legal work and insolvency assignments. The ruling said insolvency-related work falls under a different tax treatment from the reverse charge system that usually applies to legal services offered by advocates.
The case arose from a challenge by advocate Kanwal Chaudhary to a March 2021 direction from the Insolvency and Bankruptcy Board of India, which required him to issue GST-compliant invoices while working as an insolvency resolution professional. According to the board’s framework, insolvency and receivership services are not covered by the reverse charge mechanism that applies to advocates in their legal practice.
In its reasoning, the court said insolvency professionals operate under the Insolvency and Bankruptcy Code and the board’s regulations, which form a separate legal framework from the Advocates Act. The judges said that while the work may involve legal knowledge, it is still a specialised service in its own right. The board’s registration system for insolvency professionals shows that advocates are among the professionals eligible to enter that field after meeting the prescribed requirements, including the necessary examination and registration process.
The effect of the ruling is that the same person may continue to provide legal services under the reverse charge mechanism, but must account for GST under the forward charge when acting as an insolvency professional. The court said the two roles should be read harmoniously, rather than treated as interchangeable, and that advocates entering the insolvency space take on a distinct professional function with its own tax consequences.
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