On 12 January 2021, the Gauteng High Court delivered judgement in the matter of MTN (Pty) Ltd v CSARS (79960/2019) , in respect of a declaratory order that MTN sought to confirm their interpretation of the VAT treatment of certain airtime vouchers. The VAT Act distinguishes between two types of vouchers – those that can be used for unknown goods and services at the time of issue (consider, for example, a retail shopping voucher); and those vouchers that can be spent on specific goods and services (in other words, not able to be used for goods and services other than those specified).
Although the VAT consequences of the issue of the vouchers ultimately are the same, the matter becomes relevant for the time at which output tax should be paid in respect of the transaction. Section 10(18) of the VAT Act deals with general vouchers, whilst section 10(19) deals with vouchers for specified goods or services. In the case of general vouchers, the VAT output liability is delayed until such a time that the voucher has been exchanged or redeemed for goods or services – this is the case since, at the time of issue of the voucher, it is unsure what those goods or services might entail. For example, a grocery voucher that could be spent on either standard-rated items or zero-rated fresh produce. In the case of vouchers for specified goods or services, the types of goods or services are already known at the point in time when the voucher is issued, and at which time the output tax is levied. In both instances, output tax is levied on the value of the voucher – but in the former situation, the timing can be significantly delayed, depending on how long the voucher is valid for.
MTN requested the court to confirm their treatment of “airtime vouchers” which can be spent on SMSs, data, or cell phone calls; and indeed, that it constituted a general voucher as opposed to a specified voucher. The court did not agree with MTN’s interpretation and indicated that the vouchers are indeed specified since it related to “airtime”. MTN would therefore accordingly be liable for output tax at the point in time when such vouchers are issued. Unfortunately, the court did not provide sufficient insights into their reasoning and the judgement has received substantial criticism from those in the industry.
We expect this judgement to go on appeal in 2021 as it could have a significant impact on any vendors who issue vouchers to the general public.
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