Datuk Malik Imtiaz Sarwar

KUCHING: The Kuching High Court yesterday ruled that Sarawak has the power to impose the State Sales Tax (SST) on petroleum products.

Justice Azhahari Kamal Ramli dismissed the judicial review application by Petroliam Nasional Berhad (Petronas) against Sarawak government on the imposition of SST.

Azhahari ruled that the power of the state to make law for imposing of sale tax derived from Article 95B (3) of the Federal Constitution (FC).

Datuk Sharifah Hasidah

“This article was added to the FC upon the recommendation of the Inter-Governmental Committee (IGC report), prior to the formation of Malaysia that, ‘each Borneo State shall have power to impose sale tax, that any discriminatory rates would not be imposed on goods of the same type but of different origin’,” he said when dismissing the judicial review application.

He added that Article 95B (3) was added by Act 26/1963 (Malaysia Act 1963) to take effect from Sep 16, 1963 which provides that the Legislature of Sabah and Sarawak may also make laws for the imposing of sales tax and any sale tax imposed in the State of Sabah and Sarawak shall be deemed to be among the matters enumerated in the State List and not in the Federal List.

“The only restriction on the power of the State Legislature to make such law can be found in paragraph (a) and (b) thereof and there is no mention that such power is only limited to matters under the state list.

“In my opinion, Article 95B (3) is not subjected to Article 74 (2); and since under Article 95B (3), any sale tax imposed by state law shall be deemed to be among the matters enumerated in the state list, the State Sales Tax Ordinance and any subsidiary legislation made thereunder are constitutional and valid,” he said.

He said since the State Sales Tax Ordinance has never been challenged before, he is of the opinion that the first respondent (Comptroller of SST) had acted within the purview of a valid law and the notice (of assessments to Petronas) were issued legally.

“The first respondent had also acted reasonably in issuing notices and the statements because the applicant (Petronas) had taken the stand that it is not a taxable person and had failed to submit the return as requested by the first respondent,” he said.

He said in this circumstance, he is of the opinion that the applicant has failed to show that they are entitled to the relief sought for.

“And the judicial review including the prayer for stay is hereby dismissed.”

He also ordered costs of RM50,000 be paid to the respondent subject to payment of allocator fee.

Petronas lawyer Datuk Malik Imtiaz Sarwar when asked if Petronas would appeal the case, said he would have to wait for his client’s instruction first.

Meanwhile, on the Sarawak government’s lawsuit against Petronas, High Court Judicial Commissioner Christopher Chin has fixed April 15, 2020 for hearing of the case.

Sarawak government is represented by State Legal Counsel Datuk Seri JC Fong and State Attorney-General Datuk Talat Mahmood Abdul Rashid.

Datuk Seri JC Fong

The five percent SST on petroleum products for export was imposed by the Sarawak government on Jan 1, 2019 under the State Sales Tax Ordinance 1998.

Petronas is said to be only oil and gas company operating in the state that has yet to pay the sales tax. They were given a deadline till end of Oct 2019 to settle what they have owed to the state.

On Nov 21, 2019, the Comptroller of SST issued a writ of summons and statement of claim against Petronas at the High Court registry in Kuching to recover the state sales tax owed by Petronas to Sarawak.

Petronas then filed for a judicial review to quash the notices of assessment for tax payment by the state government.