Herbalife v Comptroller: GST on Direct Sales - Value of Supply Dispute
Herbalife International Singapore Pte Ltd appealed against the Comptroller of Goods and Services Tax's assessment, disputing the value of supply for GST purposes. Herbalife sells nutritional products to its members at discounted rates, who then sell to consumers. The Comptroller argued that GST should be levied on the open market value, while Herbalife contended that the discounted rate should be the taxable value. The High Court allowed Herbalife's appeal, holding that the supplies were made for monetary consideration.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
Appeal allowed.
1.3 Case Type
Tax
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Herbalife appeals GST assessments, arguing discounts to members should be the taxable value, while the Comptroller seeks open market value.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Herbalife International Singapore Pte Ltd | Appellant | Corporation | Appeal Allowed | Won | Vikna Rajah, Koh Chon Kiat |
| Comptroller of Goods and Services Tax | Respondent | Government Agency | Appeal Dismissed | Lost | Bjorn Lee Long Jin, Flora Koh Swee Huang |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Choo Han Teck | Judge of the High Court | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Vikna Rajah | Rajah & Tann Singapore LLP |
| Koh Chon Kiat | Rajah & Tann Singapore LLP |
| Bjorn Lee Long Jin | Inland Revenue Authority of Singapore (Law Division) |
| Flora Koh Swee Huang | Inland Revenue Authority of Singapore (Law Division) |
4. Facts
- Herbalife Singapore sells nutritional products to registered members, who then sell to consumers.
- Members receive tiered discounts on products based on accumulated volume points.
- The Comptroller assessed GST on the open market value of the products, not the discounted price.
- The disputed GST amount was $2,187,089.99 for the period of 2012 to 2017.
- Members are not contractually bound to sell the products they purchase from Herbalife.
- The Comptroller argued that Herbalife's business structure results in revenue leakage.
- The Comptroller asserts that the appellant’s business structure results in revenue leakage.
5. Formal Citations
- Herbalife International Singapore Pte Ltd v Comptroller of Goods and Services Tax, Tax Appeal No 6 of 2022, [2023] SGHC 54
6. Timeline
| Date | Event |
|---|---|
| Accounting period begins | |
| Accounting period ends | |
| Goods and Services Tax Board of Review delivered Grounds of Decision | |
| Affidavit by Herbalife's director filed | |
| Judgment reserved | |
| Judgment issued |
7. Legal Issues
- Value of Supply for Goods and Services Tax
- Outcome: The court held that the value of the supply should be based on the discounted price paid by the members, not the open market value.
- Category: Substantive
- Monetary vs Non-Monetary Consideration
- Outcome: The court held that the consideration furnished by the members consisted wholly of money and falls to be valued under s 17(2) of the GST Act.
- Category: Substantive
8. Remedies Sought
- Appeal against the Comptroller's assessment
9. Cause of Actions
- Dispute over Goods and Services Tax Assessment
10. Practice Areas
- Tax Law
- Goods and Services Tax
11. Industries
- Retail
- Nutritional Supplements
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Fine Art Developments plc v Customs and Excise Commissioners | House of Lords | Yes | [1996] 1 WLR 1054 | United Kingdom | Cited to illustrate the application of the special valuation provision in the UK VAT Act to direct selling business models. |
| Customs and Excise Commissioners v Pippa-Dee Parties Ltd | N/A | Yes | [1981] STC 495 | United Kingdom | Cited by the Comptroller to support the argument that the UK was able to value the supply of goods in direct selling models at open market value. |
| Rosgill Group Ltd v Customs and Excise Commissioners | N/A | Yes | [1997] 3 All ER 1012 | United Kingdom | Cited by the Comptroller to support the argument that the UK was able to value the supply of goods in direct selling models at open market value. |
| Avon Cosmetics Ltd v Revenue and Customs Commissioners | N/A | Yes | [2018] 4 WLR 73 | United Kingdom | Cited to explain the need for the special valuation provision in the UK due to the revenue leakage in direct selling models. |
| Gay Choon Ing v Loh Tze Ti Terence Peter and another appeal | N/A | Yes | [2009] 2 SLR(R) 332 | Singapore | Cited for the principle that consideration must move from the promisee to the promisor in contract law. |
| Airtours Holidays Transport Ltd v Revenue and Customs Commissioners | UK Supreme Court | Yes | [2016] 4 WLR 87 | United Kingdom | Cited for the principle that consideration for a supply may be furnished by a third party in revenue law. |
| Lex Services plc v Customs Excise Commissioners | N/A | Yes | [2004] 1 WLR 1 | United Kingdom | Cited as an example of parity of value where a new car is purchased partly with money and partly with the trade-in of an old car. |
| Naturally Yours Cosmetics Ltd v Customs and Excise Commissioners | N/A | Yes | [1988] STC 879 | United Kingdom | Cited as an example where the court determined parity of value objectively in the absence of contractual apportionment of value. |
| Herbalife International Singapore Pte Ltd v Comptroller of Goods and Services Tax | General Division of the High Court | Yes | [2023] SGHC 54 | Singapore | Formal citation for this case. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Goods and Services Tax Act (Cap 117A, 2005 Rev Ed) | Singapore |
| Section 17(1) of the Goods and Services Tax Act | Singapore |
| Section 17(2) of the Goods and Services Tax Act | Singapore |
| Section 17(3) of the Goods and Services Tax Act | Singapore |
| Section 54(2) of the Goods and Services Tax Act 1993 | Singapore |
| Section 19 of the UK Value Added Tax Act 1994 | United Kingdom |
| Paragraph 2 of the Sixth Schedule of the VAT Act 1994 | United Kingdom |
15. Key Terms and Keywords
15.1 Key Terms
- Goods and Services Tax
- GST
- Value of Supply
- Open Market Value
- Direct Selling
- Tiered Discounts
- Volume Points
- Nutritional Products
- Members
- Revenue Leakage
15.2 Keywords
- GST
- Goods and Services Tax
- Value of Supply
- Direct Selling
- Herbalife
- Singapore
- Tax Appeal
16. Subjects
- Taxation
- Goods and Services Tax
- Revenue Law
17. Areas of Law
- Revenue Law
- Goods and Services Tax Law