Malaysia: Refusal Of Special Sales Tax Refund By Customs

Lately, the Customs has been rejecting applications for special refund of sales tax made under Section 190 of the Goods and Services Tax Act 2014 ("GST Act").

The reasons are:

  • there was an increase in price after the implementation of GST
  • the profit margin of the product is too high

There are two categories of special refund for goods held on hand:

  • Section 190(1): refund equal to the amount of sales tax
  • Section 190(2): refund equal to 20% of the value of the goods

Refund Equal To The Amount Of Sales Tax Paid

This refund is available subject to these conditions:

  1. Claimant is a registered person under Section 20 of the GST Act as at the effective date;
  2. Claimant on the effective date holds goods for the purposes of making a taxable supply;
  3. Goods are taxable under the Sales Tax Act 1972 and the sales tax has been charged to and paid by the claimant; and
  4. Claimant must hold the relevant supplier's invoice proving that the claimant is the recipient for which sales tax has been charged or import documents proving that the claimant is the importer, consignee or owner for which sales tax has been paid.

Refund Equal To 20% Of Value Of The Goods

This refund is available:

  1. Where the invoice does not state the sales tax charged;
  2. Goods purchased are taxable under the Sales Tax Act 1972; and
  3. Purchased from suppliers other than a licensed manufacturer.

Additional conditions are:

  1. Claimant is a registered person under Section 20 as at the effective date;
  2. Claimant on the effective date held the goods for the proposes of making a taxable supply; and
  3. Claimant has paid the amount shown on the invoice.

The 20% refund is ascertained as follows:

20% x Purchase price x Applicable sales tax rate

Claim Procedures

Application must be made no later than 6 months from the effective date.

If the special refund is RM10,000 or more, the claimant shall furnish an audit certificate signed by an approved company auditor certifying the amount claimed. For claims less than RM10,000, the claimant shall furnish an audit certificate signed by a chartered accountant certifying the amount claimed.

Entitlement to the refund shall be refused in cases where information provided is false, inaccurate, misleading or misrepresented.

Our View

The requirements for special refund of sales tax are expressly provided. If a claimant fulfills them, he is entitled to the refund.

The Customs would be acting in ultra vires for rejecting a claim on the basis that a person has increased the price after GST implementation or has a high profit margin for his product. These conditions are not found in the GST Act but likely based on Customs' internal policy. Internal policy of government departments has no legal effect. As we successfully argued in Metacorp Development v Ketua Pengarah Hasil Dalam Negeri [2011] 5 MLJ 447 and Ketua Pengarah Hasil Dalam Negeri v Success Electronics & Transformer Manufacturer Sdn Bhd (2012) MSTC ¶30-039, internal policy and circulars issued by the tax authority has no force of law.

Further, anti-profiteering is under the purview of the Ministry of Domestic Trade, Co-operatives and Consumerism and not Customs. This is evident from the Minister's speech in tabling the amendments to the Price Control and Anti-Profiteering Act 2011 upon legislating the GST Act.

In reading a taxing statute like the GST Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

If the Customs has rejected your application based on their internal policy as discussed above, your legal remedies include review application under Section 124(1) of the GST Act and judicial review application before the High Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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