July 20, 2024
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Court rules in favour of GRA in MTN tax liability case

The Commercial Division of the High Court in Accra has ruled in favor of the Ghana Revenue Authority (GRA) in the GH¢19 million tax liability case brought against Scancom PLC, owners of MTN Ghana. 

Scancom had contested GRA’s imposition of tax liability for the period January 2014 to December 2017, claiming errors and arbitrary actions by the authority. 

The court, however, sided with GRA, stating that the imposition was lawful and not arbitrary. 

MTN Ghana, dissatisfied with the ruling, had sought to reverse the tax liability order but was unsuccessful.

Excerpts of the judgment:

By virtue of the combined effect of the said provision of the Value Added Tax Act, 2013 (Act 870) for imported services, Value Added Tax will not apply only if the imported services were applied in making Taxable supplies (telecommunication business). Value Added Tax will however apply if the imported services were applied in making Exempt supplies (mobile money business).

Respondent was therefore right in applying the definition in section 65 of the Value Added Tax Act, 2013 (Act 870) to the transactions concerned in determining the total cost of imported services and apportioned between the Exempt and Taxable supplies with respect to their contribution to total revenue.

Respondent therefore did not err in law and did not act arbitrarily by imposing Value Added Tax liability on the Appellant for Imported Services for the period January 2014 to December 2017 because of Appellant’s status a Partial Exempt Trader for the period of the assessment.

On the second ground of appeal, it is clear from the provisions of the two statutes as amended that the National Health Insurance (Amendment) Act, 2018 (Act 971) and the Ghana Education Trust Fund Act, 2018 (Act 972) are separate from the Value Added Tax Act 2018 (Act 870).

That, the two laws impose tax on import of service which is not subject to input tax deduction.

The two laws impose tax or levy on import of service which is not subject to input tax deduction irrespective of what the imported service was going to be used for during the period under review.

For the relevant periods in 2018 (August 2018 to December 2018), the Value Added Tax rate of 12.5% was inapplicable on Appellant but the Ghana Educational Trust Fund Levy and National Health Insurance Levy each of 2.5% were applicable on the imported services by Appellant irrespective of whether these imported services were used to produce Taxable or Exempt supplies.

Respondent therefore did not err in law when it imposed National Health Insurance Levy and Ghana Education Trust Fund Levy (together with interest and penalties) on the Appellant on their Imported Services from August 2018 to December 2018 irrespective of whether they were applied to Taxable or Exempt services. It is for these reasons that the instant Tax Appeal fails. There will be no order as to costs. Each party is to bear its own costs.

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