VAT affirmed as the principal tax on goods and services in hotels, restaurants and event centers

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.

the Federation (AGF) was the appropriate party to be sued instead of the FIRS, who is merely an agent of the Federal Government (FG). The failure of the AGL to include the AGF in the parties to the counterclaim rendered the claim incompetent and invalidated the judgment of the FHC.

2. the AGL and itself were parties to the judgement of the Supreme Court (SC) in AGL v. Eko Hotels Limited, (2017), where the SC held that the VAT Act had “covered the field” on consumption taxes which includes HORC Law of Lagos State. Therefore, the similarities in the cases required all parties to stand by the decision of the SC and avoid disputing the same issue.

3. the constitutionality of the Taxes and Levies (Approved List for Collection) Act  Amendment) Order 2015 “(the Order), which amended the Taxes and Levies (Approved List for Collection) Act (TLA), was not considered in the FHC’s ruling. Specifically, Section 1(2) of the TLA, which empowers the Minister of Finance to amend the Schedule to the Act, was unconstitutional and contrary to the rule of separation of powers in the Constitution.