Speedy GST refund and the conundrum of reintroducing GST — Brynner Chiam

JUNE 28 — The recent announcement made by the Finance Minister, Tengku Datuk Seri Zafrul Abdul Aziz that the Government will expedite the Goods and Services Tax (GST) refund to ease the cash flows of businesses during this trying time is applauded. He said the Royal Malaysian Customs Department (RMCD) will employ “pay first and audit later” approach for selected companies.

Whilst this initiative may sound comforting, businesses must understand that the refund would not come by easily or automatically as the RMCD has issued a statement via its web portal to explain that the refund would still be subject to verifications. This essentially means that the RMCD would not blindly refund the money as some forms of checking will be performed.

Therefore, businesses can expect the refund to be prolonged if the RMCD has reasonable grounds to believe that the claim is not legit or there are some issues that remain unresolved. So, what are the common issues that cause the delay in refund and what should businesses do to resolve the issues to expedite the refund?

Common issues

There are various reasons and factors that could cause the refund to be delayed, the most common ones being:

  • pending audit / verification or on-going audit not finalised;
  • discrepancy in the data / information submitted versus RMCD’s records;
  • failure to furnish information / documents requested by the RMCD for verifications;
  • incorrect filling of GST-03 returns;
  • lack of constant follow-up with the officer in-charge.

What should businesses do to expedite the refund?

In essence, there are no hard and fast rules to expedite refund as there are various factors that prompted the RMCD to hold back the refund until now. One of them is the lack of funds but we know that the Government has now allocated funds to expedite the refund.

Therefore, it is important for businesses to find out the reasons why the refund remains outstanding. Is it due to insufficient funds or are there other issues? If it’s the former, the refund should be made as soon as the funds are made available by the Treasury of the Ministry of Finance but if it’s due other issues, businesses need to find out the reasons behind the delay so as to get back the money quickly.

Where the refund has not been approved, it is likely that there are certain unresolved issues which must be addressed before the refund could be processed. If necessary, you may need to discuss this with the RMCID officer to find out what could be done to bring this matter to a close.

In the event where a verification or audit is required to be conducted, you need to take a proactive approach by swiftly furnishing the information and documents required.

Fundamentally, the key to expedite the refund process is to follow up with the RMCD officer regularly. 

Will the Government reintroduce GST?

The delay in the refund process is one of the reasons that led to the demise of GST in 2018 and its replacement by Sales and Service Tax (more commonly known as SST 2.0).

The question which arises is whether the Government will reintroduce the controversial GST to boost revenue as the income tax revenue collection from individuals and businesses is expected to shrink significantly due to the Covid-19 pandemic that may give rise to a looming recession and a collapse in crude oil prices. When times are bad many businesses including individuals would pay lower or no tax as their income or profits would be adversely impacted.

GST, on the other hand, is a broad base consumption tax which would typically provide a stable revenue stream to the Government given that the tax is imposed when goods and services are consumed, not when the income is earned.

In this respect, should the Government reintroduce GST? If so, is this the right time?

The reintroduction of GST may be a solution to the Government but the move could potentially disrupt businesses if not properly managed. To the extent possible, businesses must be given sufficient time to plan if GST is reintroduced to ensure a seamless transition. Before its implementation, the outstanding GST issues coupled with refund backlogs must be addressed and resolved.

Going forward, the refund process must be expedited so that businesses can get back their money on a timely basis. Any delay is an additional cost which must be avoided as GST is not intended to be a business cost but a collection by businesses for the Government.

Fun facts: Malaysia is not the first country in the world to abolish GST / Value Added Tax (VAT) as countries such as Malta, Ghana, Belize, Grenada and Vietnam have done so in the past for various reasons. Interestingly, these countries have since reintroduced GST / VAT some years later after the abolishment. Whether Malaysia will join the bandwagon to reintroduce GST remains to be seen.

*This article is written by Brynner Chiam, a Director of Axcelasia Taxand Sdn Bhd.

**This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.

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