GST Update

Desk of CA. Praveen Sharma – 1075 Series (CAPS)

Delhi High Court: Kanwal Chaudhary v. Insolvency and Bankruptcy Board of India

The petitioner was an advocate who was also working as an Insolvency Professional under the Insolvency and Bankruptcy Code.

He argued that since he was an advocate, the services provided by him should be treated as legal services. GST on legal services provided by an advocate is generally payable by the recipient under the reverse charge mechanism.

The Delhi High Court, however, observed that the nature of services performed by an Insolvency Professional is different from ordinary legal services. An Insolvency Professional carries out various statutory, managerial and administrative responsibilities under the Insolvency and Bankruptcy Code.

These functions do not become legal services merely because the person performing them is also enrolled as an advocate. GST liability must be determined based on the actual nature of the services provided and not merely on the professional qualification of the service provider.

The Court therefore held that services provided by an advocate while acting as an Insolvency Professional are taxable under the forward charge mechanism. Accordingly, the Insolvency Professional is required to obtain GST registration and discharge GST, subject to the applicable threshold and other statutory conditions.

Key takeaway: An advocate working as an Insolvency Professional must pay GST under the forward charge mechanism because such services are distinct from ordinary legal services.

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CAPS