Page 32 - P6 Slide Taxation - Lecture Day 3 - VAT Part 2

COURT CASE: CSARS v British Airways Plc:

BA is a VAT vendor in RSA making zero-rated supplies by providing

international transport. The tickets that BA charges consist of various

elements that are separately reflected on the ticket issued to the passenger:

→ Bulk of airfare (ordinary part of the ticket);

→ Operating costs (such as airport levies, luggage handling, etc).

SARS wanted BA to pay over output tax at 14% on the charge of operating

costs, being the service charge levied by ACSA.

Supreme Court ofAppeal decided that section 8(15) of the VATAct does not

intend for a vendor to levy different rates of VAT on services provided by

other suppliers. BA itself only renders one service to the passengers and

does not in itself render the different services that make up this single

charge. BA is merely recovering its costs in using or making use of other

service providers and does not provide these services to the passengers

itself.

Conclusion: BA was correct in calculating zero-rate

VAT on their full service charge.