JOHANNESBURG – The Constitutional Court has unanimously ruled in favour of the South African Revenue Service (SARS) in a landmark case concerning the VAT treatment of gold, confirming SARS’ interpretation of Section 11(1)(f) of the Value-Added Tax Act.

In a statement issued on 23 June, SARS Commissioner Dr Johnstone Makhubu welcomed the judgment in Lueven Metals (Pty) Ltd v Commissioner for the South African Revenue Service, saying it provides long-awaited certainty for the gold refining, banking and precious metals sectors.

The dispute centred on whether refined gold originating from previously manufactured sources, such as scrap jewellery, qualified for VAT zero-rating when sold to prescribed purchasers such as registered banks. Lueven Metals, a buyer and refiner of second-hand gold, argued that its refined gold bars qualified for zero-rating. Following an audit, SARS disagreed and assessed the supplies at the standard VAT rate.

The Constitutional Court upheld SARS’ position and dismissed the appeal with costs.

According to the court, three requirements must be met for gold to qualify for zero-rating: it must be supplied to a prescribed purchaser, be in a prescribed form, and must not have undergone any manufacturing process other than refining or manufacturing into those prescribed forms.

The court found that gold previously manufactured into jewellery or other fabricated items falls outside the scope of the zero-rating provisions, even if it is later refined.

“This judgment reaffirms a foundational principle of our constitutional democracy: that legislation must be applied as written, consistently and fairly,” said Makhubu.

He added that the ruling removes ambiguity, supports compliant businesses and fair competition, and helps protect the country’s tax base by ensuring that all revenue due to the state is collected.