Court bars FIRS from enforcing VAT on goods consumed in hotels

Justice Rilwanu Aikawa of the Federal High Court in Lagos has barred the Federal Inland Revenue Services (FIRS), from enforcing VAT provisions on goods and services consumed in hotels, restaurants and event centres in Lagos State.

Justice Aikawa gave the order while delivering judgment in the suit seeking to restrain the Attorney General (AG) of Lagos State from enforcing the Hotel Occupancy and Restaurant Consumption (Fiscalisation) Regulations Law (HORC), 2017, in the view that VAT Act has covered the field.

In the suit the Registered Trustees of Hotel Owners and Managers Association of Lagos (HOMA) had sued the AG in Lagos State and FIRS in the suit no. FHC/L/CS/360/2018.

The HOMA had asked the court to declare that by virtue of Section 7, of the VAT Act, the second defendant (FIRS) was the only lawful and constitutional agency charged with the administration and management of consumption tax generally and particularly in Lagos state.

Justice Aikawa, in delivering the judgment, dismissed the suit and held that it was lacking in merit, adding that the plaintiff was obliged to comply with the HORC Law 2009 and the HORC Regulations 2017.

The court also raised two issues by herself; whether the Federal High Court had the jurisdiction to pronounce on the constitutionality of VAT. The court resolved that it has jurisdiction.

Aikawa also held that the issue of the powers of the minister to amend the schedule to the Taxes and Levies (Approved List for Collection) Act was not in dispute before the court and so no pronouncement could be made on it.

The court in dismissing the originating summons, as lacking merit and resolving the questions and reliefs sought in favour of the first defendant, held:

“That consumption tax is not stated in either the exclusive and concurrent legislative list, in the Constitution of Nigeria, therefore, the absence on the concurrent and exclusive lists, puts consumption tax on the residual list, which is within the legislative competence and powers of state governments.

“That VAT Act can’t cover the field over what the federal government has no power to legislate upon, under the constitution, therefore the determinant factor in the issue of covering the field, is whether there is power to make the Law.

“The provisions of VAT Act relating to consumption tax are inconsistent with the Nigerian constitution.

“The Minister of Finance has corrected the anomaly, by including consumption tax in the list of taxes collectible by state government, therefore, the responsibility for collecting consumption tax lies on the state government.

“The provisions of Sections 1, 2, 4, 5 & 12 of VAT Act are in breech of the 1999 constitution and the plaintiffs are obliged to comply with the HORC Law 2009 and the HORC Regulations 2017.

“FIRS are barred from enforcing VAT provisions as it relates to consumption tax on goods and services consumed in Hotels, Restaurants and Event Centres in Lagos State, ” the judgement read.

The Registered Trustees of HOMA had filed an originating summons asking the court to determine the following:

“Whether the VAT Act regulating imposition of tax on consumption of goods and services has not covered the field on taxation of goods and services consumed in hotels, event centres and restaurant in Lagos State.

“Whether by virtue of Section 7 of the VAT Act, the second defendant (FIRS) is not the only lawful and constitutional agency charged with the administration and management of consumption tax generally and particularly in Lagos State.

“Whether the provisions of the Hotel Occupancy and Restaurant Consumption (Fiscalization) Regulations 2017 are of no effect, in view of the fact that VAT Act has covered the field”.

Consequently, the first defendant, (AG Lagos State), filed a counter-claim urging the court to determine;

“Whether the provisions of Sections 1, 2, 4, 5 & 12 of VAT Act by which the FIRS imposes tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State is inconsistent with the provisions of Sections 4(2), 4(a) & (b) and 4 (7) (a) & (b) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and therefore unconstitutional and invalid?

“Whether by the provisions of Section 4 (7) of the 1999 Constitution of Nigeria, the provisions of the Taxes and Levies (Approved List for Collection) Act Cap T2 Laws of the Federation of Nigeria as amended by the Schedule to the Taxes and Levies order 2015) and the provisions of HORC Law 2009.

“Whether the counter-claimant is the only constitutional and lawful body empowered to assess, impose and collect taxes from customers of the Plaintiff for goods and services consumed in hotels, restaurant and event centres in Lagos State.

The first defendant sought some reliefs which included;

“A declaration that the provisions of Sections 1, 2, 4, 5 & 12 of VAT Act is inconsistent with the constitution and therefore invalid and unconstitutional.

“A declaration that the counter claimant (AG) is the only constitutional and lawful body empowered to assess, impose and collect consumption tax in Lagos State.

“A declaration that the plaintiff is obliged to comply and implement the provisions of the HORC Law, made pursuant thereto, in relation to good and services consumed in Hotels, Restaurant and Event Centres in Lagos State

“An order of perpetual injunction restraining the FIRS from implementing or enforcing the provisions of VAT Act on customers of the plaintiff for goods and services consumed in hotels, event centres and restaurant in Lagos State”.

All efforts by NAN to reach the Lagos Attorney General and the Director Legal Services of the Lagos State Internal Revenue for their comments on this judgment, as at the time of filing this report, has been abortive.

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