Court Suspends VAT Hike: SARS, Treasury Confirm VAT Remains at 15% Beyond May 2025

The increase in VAT from 15% to 15.5% was first announced earlier in 2025 as part of government measures to address fiscal pressures.

 

In a significant development for South African consumers and businesses, the Commissioner of the South African Revenue Service (SARS), Edward Kieswetter, has welcomed the formal court order that suspends the anticipated 0.5 percentage point increase in value-added tax (VAT), which was initially scheduled to come into effect on 1 May 2025.

Agreement Reached to Suspend VAT Hike

The increase in VAT from 15% to 15.5% was first announced earlier in 2025 as part of government measures to address fiscal pressures. However, in the face of mounting legal challenges and widespread public opposition, a settlement was reached between the government, represented by the Minister of Finance, Enoch Godongwana, and the two main opposition parties involved in the court action — the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF).

The agreement was ratified by the Western Cape High Court on 27 April 2025. It officially suspends the implementation of the VAT increase, providing much-needed certainty to businesses and consumers across the country.

“This is an important order that provides clarity to SARS to effectively and efficiently administer the VAT Act. It also has practical implications for consumers and VAT vendors charged with managing VAT,” Kieswetter said in a statement following the court’s decision.

SARS Urges Vendors to Maintain 15% VAT Rate

Following the court ruling, SARS issued a directive to all VAT vendors to readjust their systems back to the 15% VAT rate immediately. The revenue authority emphasized that there is no legal basis for vendors to implement the previously announced increase.

“In light of the court’s order, vendors must ensure that their point-of-sale systems, accounting platforms, and pricing structures reflect the current VAT rate of 15%. Any VAT charged above this rate is unlawful,” SARS said.

SARS further advised consumers to be vigilant and verify that they are being charged the correct VAT rate. Should consumers encounter instances where they are incorrectly charged 15.5%, they are encouraged to raise the issue with the vendor directly to resolve the matter promptly.

“In the unlikely event they are charged 15.5%, consumers should bring this to the attention of the vendor and ensure that this is resolved at the point of sale or otherwise by mutual agreement,” the revenue service advised.

Finance Minister Confirms Suspension

Finance Minister Enoch Godongwana also welcomed the court’s decision, stating that it aligns perfectly with his earlier public announcement made on 23 April 2025 to suspend the VAT increase.

The Minister indicated that after voluntarily announcing the withdrawal of the VAT adjustment, there was no longer a reason to continue contesting the matter in court. According to a statement released by the National Treasury, the Minister submitted an affidavit to the court on Sunday, 27 April 2025, confirming the government's position in response to a supplementary affidavit filed by the DA.

“The context to the suspension of the increase is set out in an affidavit filed earlier on Sunday by the Minister in response to the Democratic Alliance’s (‘the DA’) supplementary affidavit filed on 25 April 2025,” the Treasury explained.

Godongwana's decision to withdraw the VAT increase stems from a broader reassessment of economic conditions and concerns raised by various stakeholders regarding the impact of a VAT hike on already strained household finances.

Impact on Consumers and Businesses

The suspension of the VAT increase brings immediate relief to South African consumers, many of whom were bracing for a rise in the cost of living. The decision also eases the burden on businesses, particularly small and medium-sized enterprises, which would have needed to undergo expensive system reconfigurations and manage customer communication around price changes.

Retailers and vendors are now advised to audit their systems to ensure compliance and avoid any potential administrative penalties.

The court’s intervention also underscores the growing influence of judicial oversight in fiscal policy matters, ensuring that any major tax changes undergo proper scrutiny, consultation, and adherence to constitutional requirements.

Looking Ahead

Although the suspension of the VAT increase resolves immediate concerns, South Africa still faces ongoing fiscal challenges, including high debt levels and the need for structural economic reforms. The National Treasury is expected to explore alternative revenue-generating strategies while attempting to stimulate economic growth and maintain social support programs.

Further announcements from the Minister of Finance regarding fiscal consolidation and revenue strategies are expected later in the year.