Western Cape High Court orders scrapping of the 0.5% VAT increase

National Treasury has been dealt another blow after the Western Cape High Court ordered the scrapping of the 0.5% VAT increase until Parliament passes legislation making Finance Minister Enoch Godongwana’s decision to reverse the VAT hike an act of Parliament.

The court made the order on Sunday in the DA and EFF’s court challenge to have the VAT rate adjustment set aside.

Order

Despite Gondongwana’s recent announcement that the VAT hike has been reversed, the court ruled in favour of the DA and EFF.

“The Minister of Finance’s announcement on 12 March 2025 made under section 7(4) of the Value-Added Tax Act 89 of 1991, whereby the Value-Added Tax (VAT) rate was adjusted as follows “the first 0.5 percentage point increase in the VAT rate will take effect on 1 May 2025 and the second 0.5 percentage point increase will take effect on 1 April 2026”, is suspended pending the passing of legislation regulating the VAT rate or the final determination of Part B whichever occurs first.”

In the ruling, the court also overturned the resolution of the National Assembly (NA) adopting the report of the Joint Standing Committee on Finance on the Fiscal Framework and Revenue proposals adopted earlier this month.

“The resolutions of the National Assembly and the National Council of Provinces, adopted on 2 April 2025, to accept the report of the Standing Committee on Finance and the Select Committee on Finance, on the 2025 Fiscal Framework, are set aside.”

ALSO READ: DA files supplementary affidavit to block the proposed VAT hike

Court costs

National Assembly Speaker Thoko Didiza and National Council of Provinces Chairperson Refilwe Mtshweni-Tsipane have also been ordered to pay 50% of the legal costs, including costs to two senior counsel.

The court’s order is subject to Part B of the DA’s application, which seeks to have the VAT Act declared unconstitutional.

DA affidavits

During the weekend, the DA and EFF filed supplementary papers in the multilayered court case.

In the affidavit,  the DA also argued that, even if the High Court sets aside the fiscal framework, which Parliament now agrees it should, it won’t prevent the VAT increase from kicking in next week.

“The SA Revenue Service’s apparent view to the contrary is plainly wrong. Its advice to vendors – which contradicts the minister’s own position – creates further legal confusion,” the DA said in the affidavit.

ALSO READ: Treasury reverses proposed VAT hike, will remain at 15%

EFF affidavit

In their court filing, the EFF expressed “deep concerns” about the conduct of the Speaker of the National Assembly and parliamentary secretaries, accusing them of entangling Parliament in partisan politics.

The EFF said that South Africa currently has no lawful budget, arguing that the fiscal framework and revenue proposals were adopted through processes that violate the Constitution and the Money Bills Amendment Procedure and Related Matters Act.

“The only legitimate and practical way forward is a full reset of the 2025 budget process to re-establish constitutional compliance and fiscal legitimacy,” the EFF asserted.

Vat reversed

The High Court’s order comes after Gondongwana’s decision to withdraw the VAT increase and also offer the DA an out-of-court settlement in its application.

The VAT rate was scheduled to rise to 15.5% on 1 May, but growing political and public pressure placed Finance Minister Enoch Godongwana under strain to abandon the proposed increase.

Treasury said it will “consider” other proposals as potential amendments in upcoming budgets.

ALSO READ: EFF calls for resignation of Godongwana amid VAT fiasco