The Constitutional Court has ruled that the zero-rating provided by section 11(1)(f) of the Value-Added Tax Act does not apply to gold that has previously undergone a manufacturing process other than those permitted by the section, even if the gold is later refined and supplied to a bank or other prescribed purchaser in one of the listed forms.
In a unanimous decision delivered on 23 June 2026, the Court dismissed an appeal by Lueven Metals (Pty) Ltd and held that section 11(1)(f) excludes from zero-rating gold that has undergone “a historical manufacturing process other than refining or manufacturing into one of the eight forms”.
The decision confirms that the availability of zero-rating under the section does not depend only on the identity of the purchaser or the final form in which the gold is supplied. It also depends on the manufacturing history of the gold.
For vendors dealing in second-hand gold, the judgment confirms that the concession is unavailable where the gold has previously undergone a disqualifying manufacturing process.
Dr Johnstone Makhubu, the Commissioner of the South African Revenue Service, welcomed the ruling, describing it as providing certainty to the gold, refining, and banking sectors regarding the VAT treatment of gold supplied under section 11(1)(f).
The judgment comes at a time when National Treasury has proposed repealing section 11(1)(f). In the 2026 Budget Review, Treasury noted the practical difficulties of tracing the origin and manufacturing history of gold once material from different sources has been refined together. The provision often results in lengthy SARS audits to verify the application of zero-rating.
Background to the dispute
Lueven Metals is a registered Category C VAT vendor that trades in and refines precious metals, including gold, and buys second-hand gold such as scrap jewellery.
It deposited lower-purity gold with Rand Refinery, which refined the gold further before delivering pure gold bars to Absa Bank. For years, Lueven treated those supplies as zero-rated, which meant that Absa bought the gold bars without VAT and Lueven was able to deduct the input tax paid on the second-hand gold it purchased.
SARS challenged that practice after an audit in 2021. SARS concluded that the second-hand gold used by Lueven for its supplies to Absa had already been subjected to manufacturing processes before reaching the refinery and therefore did not qualify for zero-rating under section 11(1)(f).
Leuven instituted proceedings in the High Court in Pretoria, seeking a declaratory order regarding the correct interpretation of section 11(1)(f). The High Court held against Lueven.
The Supreme Court of Appeal (SCA) did not decide the interpretive issue, instead holding that a declaratory order was not appropriate because the matter should proceed through the machinery of the Tax Administration Act (TAA).
That procedural obstacle was removed in the Constitutional Court’s earlier decision in the “Five Tax Cases”, that procedural obstacle was removed: the Court held that the SCA had erred on the section 105 issue, and the merits in Lueven’s case would stand over for later determination. The five cases concerned consolidated applications for leave to appeal that all implicated the interpretation and application of section 105 of the TAA.
The parties’ competing interpretations
Section 11(1)(f) of the VAT Act zero-rates certain supplies of gold to the South African Reserve Bank, the South African Mint Company (Pty) Ltd, or a registered bank where the gold is supplied “in the form of bars, blank coins, ingots, buttons, wire, plate, or granules, or in solution, which has not undergone any manufacturing process other than the refining thereof or the manufacture or production of such bars, blank coins, ingots, buttons, wire, plate, granules, or solution”.
The dispute turned on the meaning and effect of that final qualifying phrase.
Lueven’s case was that the section should be understood as requiring, in substance, that the supply be to a prescribed purchaser, that the supply be of gold, and that the gold be supplied in one of the listed forms. On that reading, the phrase beginning with “which has not undergone” did not establish a separate exclusion that disqualified second-hand gold once it had been refined and supplied in a prescribed form.
Lueven also argued that refining eradicates prior forms, and that because newly mined and second-hand gold are commingled at Rand Refinery, it is impossible to distinguish between them after refining.
SARS contended that the section contains a further, distinct requirement. On its reading, zero-rating applies only if the supply is to one of the prescribed purchasers, the gold is in one of the prescribed forms, and the gold has not previously undergone any manufacturing process other than refining or manufacture or production into one of those prescribed forms. Because gold in jewellery or other scrap items had already been manufactured into a non-prescribed form, SARS said that gold fell outside the concession.
The Court’s interpretation of section 11(1)(f)
Writing for the Court, Justice Leona Theron agreed with SARS’s reading, but did so through the Court’s interpretive analysis rather than by merely adopting SARS’s position.
Applying the established approach to statutory interpretation set out in Endumeni, the Court considered text, context, and purpose together. It held that section 11(1)(f) imposes three requirements for zero-rating: the supply must be to a prescribed purchaser; the gold must be in one of the prescribed forms; and the gold must not have undergone any manufacturing process other than refining or the manufacture or production of one of the prescribed forms.
The distinction between the second and third requirements was central to the outcome. The Court held that the second requirement concerns the final form in which the gold is supplied, while the third concerns the manufacturing process or history of the gold. That meant the Court had to ask not only what form the gold took at the point of supply, but also what manufacturing processes it had undergone before reaching that point.
On the facts, the Court held that Lueven’s gold had undergone three stages before supply to Absa: it had first been manufactured into an earlier form, then refined, and then manufactured into one of the prescribed forms. Because those earlier forms included non-prescribed products such as jewellery, the gold had already undergone a disqualifying manufacturing process.
The Court rejected the argument that refining erased the legal significance of that history. Refining changed the form and purity of the gold, but it did not alter the fact that the gold had previously undergone manufacturing into a non-prescribed form.
An aspect of the Court’s reasoning was that Lueven’s interpretation would deprive words in the section of any real work to do. If section 11(1)(f) were concerned only with the final form of the gold and the identity of the purchaser, the phrase beginning with “which has not undergone” would become largely redundant. The Court held that this could not be right. Statutory interpretation, it said, should avoid rendering words or phrases superfluous. On the Court’s reading, the disputed phrase had to refer to earlier manufacturing processes in the gold’s history; otherwise, it served no independent function.
The Court also rejected Lueven’s submission that this reading would prevent even newly mined gold from qualifying for zero-rating.
The judgment noted that mines often cast gold into doré bars before sending it to Rand Refinery for further processing. “The process from mined gold to doré bars includes refinement and the production of bars, both permissible processes under section 11(1)(f),” the Court said, adding that nothing in section 11(1)(f) precludes a gold bar from being refined multiple times. What the section excludes is not repeated refining, but prior manufacture into a form other than those contemplated by the section.
Why the contextual arguments failed
Having found that the text strongly favoured SARS’s interpretation, the Court turned to context. Lueven relied on the Explanatory Memorandum to the VAT Bill, the broader VAT scheme, prior SARS binding class rulings, and provisions in the Mining Rights Act and the Precious Metals Act. None of those materials altered the Court’s conclusion.
The Explanatory Memorandum, the Court said, merely described the effect of section 11(1)(f) in general terms and did not resolve the disputed requirement. General observations about the structure and policy of VAT also could not override the actual wording of the section.
The comparison with other legislation met the same response. Lueven argued that the Mining Rights Act and Precious Metals Act do not distinguish between newly mined and second-hand gold, and section 11(1)(f) should therefore not be read as drawing that distinction either. The Court held that those statutes concern different subject matter and are not on the same subject as the VAT Act for this purpose. Their treatment of precious metals did not determine the meaning of the VAT Act’s zero-rating provision.
Lueven also relied on SARS’s binding class rulings, which were issued in response to documentary and record-keeping difficulties arising from the commingling of gold at Rand Refinery. Lueven said those rulings showed that SARS had historically treated supplies such as its own as zero-rated, and SARS was bound by that earlier position.
The Court accepted that the rulings appeared to assume that depositors such as Lueven could access the tax benefit but held that they did not provide interpretive guidance on the question before it. The rulings addressed documentary arrangements, not the meaning of the third requirement in section 11(1)(f). As the Court observed, one would “search in vain” in the rulings for any discussion of what constituted a disqualifying manufacturing or production process.
In dealing with the rulings, the Court also restated a broader principle from Marshall and Others v Commissioner for SARS (2018), the meaning of legislation is not determined by the unilateral administrative practice of one arm of government. Even if SARS had historically approached the matter differently, that did not control the Court’s interpretation of the statute.
Purpose did not resolve the dispute
The purposive arguments also did not decide the matter.
Lueven argued that the purpose of the section was to ensure the availability, continuity, and sustainability of gold supply to prescribed purchasers such as the Reserve Bank, the Mint and registered banks, and that the provision should therefore be interpreted to include second-hand gold.
SARS, by contrast, contended that the purpose was to support the gold-mining industry by affording newly mined gold favourable VAT treatment.
The Court held that both explanations were plausible, but neither was clearly evidenced in the text of the VAT Act or admissible parliamentary material. In those circumstances, purposive reasoning did not clearly favour either side.
The Court accordingly confirmed the High Court’s interpretation and held that section 11(1)(f) excludes from zero-rating “the supply of second-hand gold (in other words, any gold that has undergone a historical manufacturing process other than refining or manufacturing into one of the eight forms)”.
It dismissed the appeal with costs, including the costs of two counsel.
It also refused Lueven’s application, brought after the hearing, for leave to file supplementary written submissions, holding that Lueven had already had ample opportunity to advance its textual argument and that the proposed submissions introduced nothing materially new.
Implications
For VAT vendors and others in the gold supply chain, the practical effect of the judgment is clear. Zero-rating under section 11(1)(f) is not triggered simply because refined gold is supplied to a qualifying institution in bar form or another prescribed form. A vendor must also be able to show that the gold has not, at some earlier stage in its history, been manufactured into a non-prescribed product.
Click here to download the judgment.
