The immediate impact of the decision is that credit card issuers who have treated late payment fees as consideration for financial supplies could be able to claim increased input tax credits for previous years. 

However, if some fees are treated as consideration for taxable supplies of payment systems, they could be liable for additional GST.

The implications of the case for late payment fees on credit cards could potentially also be relevant to late payment fees and other fees for contractual breach in relation to a much wider range of financial supplies, Stitt said.

However, the final outcome of the decision would depend on whether or not it was appealed by the Commissioner, and the result of that appeal.

Stitt said the dispute between Amex and the Commissioner, which arose from the apportionment method Amex used to claim input tax credits for costs incurred in its charge card and credit card businesses, had revealed fundamental weaknesses in how the financial supply concept was defined.

These were weaknesses “that both the Commissioner and taxpayers often choose to overlook, in order to give effect to the perceived policy intent of the regime”.

“Not for the first time, when a judge has been called on to interpret GST legislation without the baggage of preconceived notions as to how the GST regime is intended to operate, he has come up with an answer that is at odds with both perceived policy intent and market practice.”

The issue in dispute was whether or not fees charged by Amex to cardholders for failing to pay amounts when they were due were consideration for input taxed financial supplies.

“As a minimum, the Amex decision will have credit card issuers reviewing the apportionment methodologies adopted in previous periods, and recalculating their input tax credit entitlements on the basis that late payment fees are not consideration for financial supplies,” Stitt said.

“For that reason alone, it seems inevitable that the Commissioner will appeal the decision.”