Iras had issued notices of assessment to Herbalife on the basis that the supplies were valued at open market value. Read more at straitstimes.com.
SINGAPORE – Direct sales company Herbalife has won its appeal to the High Court against the taxman over the value of the products it supplies to its members on which goods and services tax is levied.
The issue in contention in the case is whether the discounted rate is taken as the value of the supply, as contended by Herbalife, or the open market value of the nutritional products, as argued by the Inland Revenue Authority of Singapore .Justice Choo accepted that Herbalife’s business model results in revenue leakage, but said the question is how it ought to be plugged.
But this is beyond the power of the courts in Singapore, and must be implemented legislatively, said Justice Choo. Under Herbalife’s direct selling business model, it sells products only to members, who in turn sell them to consumers. Iras argued that if the members were GST-registered, the final sale to end-consumers would be taxable supplies and GST would be levied on the full price, which is the contractually stated retail price of the products without the tiered discount.Because the members are not GST-registered, the only taxable supply is the supply between Herbalife and the members.
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