The Commissioner for the South African Revenue Service v Free State Development Corporation

The Free State Development Corporation (FSDC), a registered VAT vendor and public entity, received grant funding from the Department of Trade and Industry under a Memorandum of Funding Agreement and a Special Economic Zone Funding Agreement to plan and implement a Special Economic Zone in the Free State. FSDC declared the amounts received as zero-rated supplies in its VAT returns. SARS raised additional VAT assessments of approximately R39 million, contending that the amounts constituted taxable supplies or deemed supplies at the standard rate. FSDC objected, arguing that the payments were zero-rated and that it acted merely as a conduit. After its objection was disallowed and the appeal progressed in the Tax Court, FSDC sought to withdraw its original statement of grounds of appeal and file an amended statement contending that the transactions were neither supplies nor deemed supplies at all. SARS opposed this, arguing the amendment introduced a new ground of objection contrary to Tax Court Rule 10(3). The Tax Court allowed the amendment, and SARS appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel where employed.

The case clarifies the appealability of interlocutory orders of the Tax Court where jurisdiction or competence is in issue. It confirms a flexible, substance-based approach to Tax Court Rule 10(3), allowing taxpayers to amend appeal grounds where the amended legal argument is foreshadowed in the original objection, even if the initial legal characterisation was incorrect. This is important for VAT litigation and tax procedure in South Africa.