MTN has failed in its appeal to overturn a private ruling by the SA Revenue Service (Sars) on a tax dispute with the sale of its prepaid vouchers.
The Supreme Court Appeal (SCA) this week squashed the appeal.
Sars had directed that the sale of its prepaid vouchers fell under section 10 (19) of the Value Added Tax Act, and not section 10 (18), thereby attracting VAT payment.
MTN had approached the SCA seeking an order declaring that the Sars ruling was incorrect and should be set aside.
MTN’s bone of contention was that VAT should not be accounted for when the said voucher was sold to the subscriber.
According to the judgment, historically, the sale of the pre-paid vouchers was dealt with by MTN as falling under section 10(19) of the Value-Added Tax Act 89 of 1991 (the Act).
However, on November15, 2017, MTN sought a private binding ruling from SARS under s 41B of the Act, declaring that the sale of the pre-paid vouchers could be dealt with as falling under s 10(18) of the Act.
Two years later, Sars issued a private binding ruling to the effect that section 10(19) and not section 10(18) of the Act applied.
Aggrieved by the ruling, MTN approached the Pretoria High Court, asking it to set the ruling aside. This application was dismissed.
MTN submitted that two types of vouchers supplied by it fell under the different sections concerned. The first type specifies the goods, which could be obtained by using the voucher.
According to court papers, MTN gave an example of a data voucher.
“What is purchased is the right to use the volume of data purchased. It cannot be used to access anything else,” court papers read.
This data voucher falls under section 10(19), the service provider argued. The second type is the pre-paid vouchers. These have a rand value and can be used to access a wide range of services offered by MTN. They are not limited to specific services such as data. These were, MTN said, “typically referred to as airtime vouchers” and fell under section 10(18).
MTN analysed the key difference between the two provisions. The company said under section 10(18), the voucher specifies the value of goods or services that may be selected rather than specifying the goods or services that the voucher may be used to acquire from the vendor. Under s 10(19), the particular goods or services to which the holder is entitled are specified rather than their value.
The court in the matter had to decide whether the pre-paid vouchers fell into one category or the other. “Without that enquiry rendering a clear answer, the grant of declaratory relief would not be warranted,” read court papers.
In its ruling, the SCA found that the application for declaratory relief was not appropriate in this matter.
“That being the case, the second issue in the appeal as to whether the ruling was correct or not need not, indeed cannot, be decided. This all means that, although the high court incorrectly entertained declaratory relief, it was correct in dismissing the application. The appeal must, therefore, fail,” said Judge Trevor Gorven.
BUSINESS REPORT