GST payable on airport development levy
2009 case note – Any consideration including a charge or levy made for a supply of services is subject to GST - the use made of that consideration is irrelevant.
The Court held that the development levy that the airport charged to departing passengers was consideration for the use of airport facilities, and therefore the airport was required to account for goods and services tax ("GST") on the levy.
Impact of decision
Any consideration (including a charge or levy) made for a supply of services is subject to GST. The use made of that consideration is irrelevant.
Rotorua Regional Airport Limited ("RRAL") operates the Rotorua Airport. Since 1 October 2002 it has charged a $5 levy on passengers over the age of 5 years departing from the airport. The levy (development levy) is used to pay for the development of facilities at the airport.
RRAL sought a declaration under the Declaratory Judgments Act 1908, that the development levy is not subject to section 8(1) of the Goods and Services Tax Act 1985 ("GST Act"). RRAL contended that the development levy is a charge authorised by legislation rather than consideration for services. The Commissioner contended that the development levy is consideration for the use of airport facilities and the use to which the funds gathered from the levy are put is not relevant.
The Court agreed with the Commissioner's submission that the use to which the levy was put was irrelevant. Instead, the Judge focused on the legal relationship between RRAL and the departing passengers, and found that the levy was consideration for a service supplied by RRAL. Passengers were required to pay the development levy before they were allowed to board the aircraft. If passengers did not pay the levy, RRAL could deny them access to the aircraft. The Court held that there was a nexus between the payment and the services, the payment being "in respect of" or "in response to" the supply of services.
His Honour consider/ed that the present case held some similarities to Turakina Māori Girls College Board of Trustees & Ors v CIR (1993) 15 NZTC 10,032 (CA) where the issue was whether attendance dues charged to parents of children at integrated schools were consideration for a taxable supply. He also considered that this interpretation was not inconsistent with the empowering section (4A) of the Airport Authorities Act.
The Judge concluded that the development levy is consideration for a taxable supply in terms of section 8 of the GST Act, and declined RRAL's application for declaratory relief.
Goods and Services Tax Act 1985; Airport Authorities Act 1966