Landmark Singapore Decision on GST Liability for Goods Sold via Direct Selling Business Model.

The recent landmark decision of Herbalife International Singapore Pte Ltd v Comptroller of Goods and Services Tax [2023] SGHC 54 lays down the principles in calculating the Goods and Services Tax (“GST”) liability for goods sold via a direct selling model where the goods are supplied only to members who are registered with the business (“Members”) at a discount and the Members may in turn sell the goods to consumers. The primary issue before the Singapore High Court was whether GST should be levied on the discounted rate of goods sold by the business to its Members or the open market value of the goods. Ruling in favour of the business in this case, Herbalife International Singapore Pte Ltd (“Herbalife”), the Singapore High Court held that it should be the discounted rate of the goods. The Singapore High Court’s decision provides helpful guidance on the meaning of consideration under GST law and whether contractual undertaking of obligations could constitute non-monetary consideration for the purposes of section 17(3) of the Goods and Services Tax Act 1993.

This landmark decision will impact all direct marketing companies. Herbalife was represented by Vikna Rajah, Head of Tax & Trust practice and Co-Head of Private Wealth practice, and Koh Chon Kiat, Senior Associate in the Tax & Trust practice.

In this Update, we consider the decision of the Singapore High Court.