Blue Lagoon Beach Hotel & Co Ltd v Assessment Review Committee and another (Mauritius)

For VAT, a supply of services requires a legal relationship involving reciprocal performance, remuneration constituting consideration, and a direct link between service and payment. The inquiry is objective. A hotel’s undertaking to reserve and make accommodation available can itself be the service, even where no guest uses the room. A tripartite arrangement does not break the link where the hotel’s obligation is owed to the tour operator. Whether an advance payment is taxable consideration or a cancellation charge depends on the contract. A time-of-supply provision determines when VAT is accounted for; it does not turn a transaction outside the statutory definition of supply into a taxable supply.

Blue Lagoon Beach Hotel & Co Ltd operated a hotel in Mauritius and contracted with travel operators to purchase specified rooms at fixed prices, payable in advance. Where no customer occupied a reserved room, Blue Lagoon treated the payment as special income and did not account for VAT.

The Mauritius Revenue Authority raised assessments for the relevant taxable periods. The Assessment Review Committee found that making rooms available against payment was a service supplied for consideration. The Supreme Court of Mauritius upheld that conclusion on different grounds. The appeal concerned whether the payments were consideration for a taxable supply under the Value Added Tax Act 1998, and whether the time-of-supply provisions could independently deem a supply. A proposed new zero-rating argument was refused. The central issue was whether VAT was payable on payments for unused reserved accommodation.

The Board, in the judgment of Lady Rose, dismissed the appeal. It had refused permission to introduce a new zero-rating argument shortly before the hearing because the respondents would suffer prejudice and the issue depended on factual matters not explored below.

1. Applicable VAT test. Sections 2 and 4 of the Value Added Tax Act 1998 were construed consistently with corresponding United Kingdom and European Union provisions, subject to differences in the operation of Mauritian law. A chargeable supply requires a legal relationship involving reciprocal performance, remuneration constituting consideration, and a direct link between the service and payment. The service must be characterised objectively.
2. Nature of the service. The service supplied was the reservation and making available of accommodation, enabling the tour operator to sell rooms to its customers with confidence that accommodation and associated facilities would be provided. The obligation arose under the contract with the tour operator. The absence of a guest and the absence of a direct hotel-to-guest relationship did not prevent there being a supply. Section 4(2)(b) reinforced the conclusion because anything other than a supply of goods done for consideration falls within the supply of services.
3. Advance payments and deposits. The contractual character of the payment is decisive. The Board followed the approach in Customs and Excise Commissioners v Bass plc [1993] STC 42 and applied the reasoning in Air France-KLM and Hop!-Brit Air SAS v Ministère des Finances et des Comptes publics ECLI:EU:C:2015:841. The payment was for the right to benefit from the contracted service, whether exercised or not. The situation differed from the cancellation deposit in Société thermale d’Eugénie-les-Bains v Ministère de l’Économie, des Finances et de l’Industrie ECLI:EU:C:2007:440, which was compensation for loss rather than consideration for a service.
4. Time of supply. Section 5 determines the timing and accounting period for VAT. It does not create a supply which does not otherwise satisfy section 4. The Board applied Shophold (Mauritius) Ltd v The Assessment Review Committee [2016] UKPC 12 in rejecting any contrary reading of sections 5 and 9.

The assessments were therefore upheld and the appeal dismissed.

• Privy Council: Appeal dismissed. The Board held that payments for unused reserved accommodation were consideration for a taxable supply of services.
• Supreme Court of Mauritius: Judgment of 4 June 2018 upheld the Assessment Review Committee’s conclusion, though on different grounds.
• Assessment Review Committee: Case Stated dated 24 November 2015, made under section 21 of the Mauritius Revenue Authority Act 2004, concluded that Blue Lagoon supplied services for consideration.