Tax discounted price or market price? Herbalife defeats Iras in case involving GST of $2m

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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. Herbalife sells nutritional supplements, weight-management products and other personal care products to its members at varying discount tiers, from the standard 25 per cent...

The High Court ruled in favour of Herbalife in the case, which involved how much products supplied by Herbalife are liable for GST.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. Members who sell the products to consumers earn as profit the difference between the price they paid to Herbalife and the price they are contractually bound to sell the products. Because the members are not GST-registered, the only taxable supply is the supply between Herbalife and the members.

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