Finance Minister Enoch Godongwana.
The Western Cape high court has suspended the 0.5 percentage point VAT hike that Finance Minister Enoch Godongwana announced in his second budget speech on 12 March.
The high court said on Sunday that Godongwana’s 0.5 percentage point VAT rate adjustment is “suspended pending the passing of the legislation regulating the VAT rate or the final determination of part B of the Democratic Alliance’s case, or whichever comes first”.
Part B of the DA’s application seeks to have section 7(4) of the VAT Act declared unconstitutional.
The Democratic Alliance launched the application against the finance minister, the South African Revenue Service, the Speaker of the National Assembly and the Chairperson of the National Council of Provinces.
The court on Sunday also ordered the finance minister to pay 50% of the DA’s costs and ordered the Speaker of the National Assembly and the NCOP Chairperson to pay 50% of the Economic Freedom Fighters’ costs.
The EFF was an intervening party in the application.
The court order comes after Godongwana withdrew the implementation of the 0.5 percentage point VAT increase on Thursday. The move followed weeks of deliberation between parties of the government of national unity after they disagreed with the minister’s initial proposal to hike the VAT rate by 2% during his 19 February budget speech.
In a statement, DA Federal Council Chairperson Helen Zille said the high court’s decision to suspend the VAT hike “ensures that any changes to the VAT rate must be properly approved by Parliament before taking effect, and sets aside the unlawful support lent to this VAT hike by a number of parties”.
“We are pleased that the Minister of Finance eventually came back to the table and agreed to suspend the VAT increase in a lawful manner,” Zille added.
The Speaker of the National Assembly said on Sunday evening that the court order will enable the minister to table the budget instruments afresh, adding that they have asked the minister to give an indication of when the budget will be tabled.