Port of Spain, Trinidad. In the case of Cruise Solutions Ltd and Discovery Expeditions Ltd v The Commissioner of General Sales Tax and the Attorney General of Belize, the Caribbean Court of Justice (CCJ) today held that two companies were entitled to be repaid all general sales tax (GST) assessed, charged and collected by the relevant tax authority, from February 2007 to present, plus interest of 6% per annum.
Cruise Solutions Ltd and Discovery Expeditions Ltd are Belize tour operators that entered into contracts with international cruise lines that visit Belize to provide tours for their passengers. Previously, the cruise lines would have contracted with their passengers to supply the service of arranging tours for them with local tour operators. Passengers were not charged the GST for this service as part of their package holiday since it was considered part of the supply of the “international transport” of the passengers and therefore exempt under the GST Act.
Under the Belize General Sales Tax Act, ‘a supply of services that are provided directly in connection with the operation or management of a ship or aircraft engaged in international transport’ is zero-rated for GST purposes. As a result, the cruise lines did not pay GST to the tour operators, alleging that the tour operators’ services of supplying tours were zero-rated, taking account of the fact that the cruise lines had not collected any GST from their passengers against which they could offset any GST payable by them. They believed themselves intended to fall outside the net of GST. However, the GST Commissioner insisted that GST was chargeable and the tour operators had to pay this charge.
Both tour operators filed a claim in the High Court of Belize seeking a declaration that their services were zero-rated. They also argued that they had been unlawfully charged GST and should be refunded all monies paid to the relevant tax authority with interest. However, they received an unfavourable ruling in the High Court and the Court of Appeal.
In a majority decision delivered by the Hon. Mr. Justice Hayton, the CCJ said that those courts had taken too narrow an approach to the interpretation of matters covered by the “management or operation” of a ship engaged in international transport. The operators of cruise shops as part of their operation or business provided holidays which for most passengers included the experience of having on-shore tours arranged for them by the cruise lines as an integral part of their holiday.
The services supplied by the tour operators to the cruise lines for the passengers should, therefore, be considered zero-rated as a supply of services that were “provided directly in connection with the operation of a ship engaged in international transport.”
The President of the Court, the Hon. Mr. Justice Saunders did not agree with the majority. In his opinion, after passengers safely disembarked the ship, any domestic transportation that they hire is their personal business and not connected to the ship’s operations. Additionally, to include these local tours as part of “international transport” would erase the distinction carefully set out in the legislation between the supply of domestic and international transport services. By his
interpretation of the Act, GST was payable by all suppliers of taxable services therefore in his opinion the local tour operators should be required to pay GST.
Based on the majority’s decision, however, the CCJ ordered the repayment of all GST paid by Cruise Solutions and Discover Solutions including interest as well as their legal costs. The full judgment of the Court is available on the Court’s website at www.ccj.org.