After trying all the suggested solutions here with the same Tags and even granting my current user full privileges, I decided to test using an administrator profile on the same PC.

✅ Surprisingly, Live Server worked perfectly without any changes to the configuration.

🔍 Conclusion: This indicates that the issue was related to my user profile settings rather than VS Code or Live Server itself. If you're facing a similar issue, try running VS Code with a different user profile or create a new Windows user account to see if the problem persists.

Hope this helps others facing the same issue! 🚀