Herbalife International Singapore Pte. Ltd. v Comptroller of Goods and Services Tax

Herbalife International Singapore Pte Ltd sells nutritional supplements, weight-management and personal care products through a direct selling model. It sells only to registered members, who may resell to consumers or consume the products themselves. All members receive a standard discount of 25%, and further tiered discounts of 35%, 42% and 50% are earned by accumulating volume points. It was not disputed that the supplies to members attract GST; the dispute was over their value.

The Comptroller of Goods and Services Tax assessed the supplies for the periods from 1 January 2012 to 31 March 2017 at open market value under s 17(3) of the Goods and Services Tax Act, on the footing that members gave non-monetary consideration in the form of the obligations they undertook. The Comptroller said the structure caused revenue leakage because members were not GST-registered. The disputed GST was $2,187,089.99, including the 5% late payment penalty. The GST Board of Review upheld the assessments, and Herbalife appealed to the High Court in Tax Appeal No 6 of 2022, arguing that the consideration was wholly money and fell under s 17(2).

1. Whether the absence in the GST Act of a special valuation provision like that in the UK VAT Act 1994 shows that direct selling supplies fall outside s 17(3)
2. What counts as non-monetary consideration under s 17(3) of the GST Act
3. Whether the obligations undertaken by members were non-monetary consideration for the supplies

On the UK comparison, the court noted that the UK had a special provision allowing retail-price valuation of supplies to non-taxable resellers since VAT was introduced. If the general non-monetary consideration provision had covered direct selling, the UK would not have needed that provision or a derogation from EU law. The UK cases relied on by the Comptroller, Pippa-Dee and Rosgill, concerned reward goods given in place of cash commission, not the direct selling supplies themselves. The absence of such a provision in Singapore was a strong indicator that direct selling supplies ordinarily fall outside s 17(3).

On the meaning of consideration, the court held that the contractual concept is wider than consideration in s 17(3). Because a finding of non-monetary consideration triggers open market valuation, treating items of trivial value as consideration could produce draconian results, and a self-assessed tax needs an easily ascertainable scope. The court broadly endorsed the Board's two requirements but refined them: ordinary terms of trade are not independent of the supply, and a non-monetary benefit must be sufficiently valuable and clearly given in exchange for the goods. Parity of value with the discount, as with a car trade-in, is a useful indicator and may be found objectively by the court.

Applying this, the eleven undertakings relied on, such as not promoting competitors, not auctioning products and being courteous, were terms of trade regulating members' conduct, not consideration. The members were not bound to provide marketing services, and the Comptroller identified nothing with objective parity of value to the discount. The members were principals, since title passed to them and they could do as they pleased with the goods. The court said the revenue leakage had to be closed by legislation, not by widening s 17(3).

Choo Han Teck J allowed the appeal, holding that the members' consideration consisted wholly of money so that the supplies were not to be valued at open market value under s 17(3) of the GST Act.