Geita Gold Mine’s (GGM) has lost a court battle on an appeal to escape a Sh6 billion tax liability to on fuel supplied to its contractors. The case has ended a decade-long legal fight between the Tanzania Revenue Authority (TRA) and the mining company that had previously lost the tax case twice.
“As rightly held by the tribunal, the supply of fuel to the appellant (GGM)’s contractors constituted a taxable supply for which the appellant was bound by section 58 of the VAT to charge VAT from the contractors for the supply and remit it to the respondent (TRA),” said Justices Gerald Ndika, Lugano Mwandambo and Lucia Kairo.
The tax dispute arose over a decade ago after the taxman made a tax audit into the affairs of GGM, only to discover that the company had supplied fuel to Geita Power Limited (GPL) and DTP Terrassment, for which VAT was chargable but not remitted.
Following the audit, TRA made an assessment for additional VAT splashed GGM with a Sh6.2 billion tax bill. GGM has throughout opposed the liability contending there was no outstanding VAT for the fuel it supplied to the contractors on the ground that the law has exempted them from that liability.
Tax Revenue Appeals Tribunal
TRA has rejected the objection, maintaining that the exemption from payment of VAT for imported fuel did not extend to GGM’s contractors. GGM’s first attempt to fault TRA’s tax bill suffered blow at the Tax Revenue Appeals Board (Trab) which sided with TRA and dismissed the tax case.
The company’s second avenue to challenge the Trab decision was at the Tax Revenue Appeals Tribunal (Trat). It faulted Trab’s decision on grounds that the board was wrong in disregarding Mining Development Agreement (MDA) that company had with the government.
It was their contention that Trab was wrong in holding that there was a taxable supply to the contractors in respect of fuel she supplied for exclusive use in the mining activities. GGM’s also argued that Trab erred in failing to rule that GGM enjoyed relief from VAT pursuant to Third Schedule to the VAT Act.
In its judgment of October, 2012, Trat sustained Trab’s decision and dismissed the appeal. The tribunal’s reasoning was that despite the board’s disregarding the MDA, such approach did not have any bearing on the ultimate decision on the appeal.
The tribunal also concurred with the board that there was a taxable supply of fuel to GGM’s contractors which was chargeable with VAT. The tribunal maintained that the tax relief did not extend to contractors irrespective of the fact that such contractors were delivering mining services on behalf of the appellant.