The Court of Appeal (COA or “the Court”) sitting in Lagos recently decided in Federal Inland Revenue Service (FIRS or “the Appellant”) and Attorney General of Lagos State (AGL or “First Respondent”) & The Registered Trustees of Hotel Owners and Managers Association of Lagos (RTHMAL or “Second Respondent”) that VAT is the principal tax on consumption of goods and services in Nigeria. The COA further held that the VAT Act, being an existing Federal law, has covered the field on consumption tax and, therefore, supersedes any similar State Law including the Lagos State Hotel Occupancy and Restaurant Consumption (HORC) Law.
Facts of the case
On 3 October 2019, the Federal High Court (FHC) sitting in Lagos decided in RTHMAL and AGL & the FIRS that Lagos State was the only constitutional and lawful body empowered to assess, impose and collect tax from customers for goods and services consumed in hotels, restaurants and event centres in the State. The FHC also ruled that the provisions of Sections 1, 2, 4, 5 and 12 of the VAT Act, which sought to impose tax on customers for goods and services consumed in hotels, restaurants and event centres in Lagos State, were inconsistent with the provisions of Sections 4(2), (4)(a) & (b) and Section 4(7) (a) & (b) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (“the Constitution) and, therefore, unconstitutional and invalid.
Consequently, the FHC made an order of perpetual injunction restraining the FIRS, its staff, servants and agents from implementing or enforcing the provisions of VAT Act on customers of hotels, restaurants and event centres in Lagos State.
Dissatisfied with the FHC’s judgement, the FIRS filed an appeal with the COA.