Petronas lawyer casts doubt on Sarawak’s power to impose SST 

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The Sarawak State Assembly building seen from the air. Bernama File Photo

KUCHING: Sarawak’s power to impose the State Sales Tax (SST) is “narrow or restricted”, the High Court heard on the first day of the judicial review filed by Petroliam Nasional Berhad (Petronas) against the imposition of the tax.

The corporation’s lawyer Datuk Malik Imtiaz Sarwar said this in his submission today to seek a court order to quash three SST notices of assessment (NOA) for RM1.3 billion, which is calculated up to September 2019.

The notices were dated Aug 29 2019, Oct 7 2019 and Nov 14 2019.

Malik also argued that petroleum is only one of the items in the State List but not the Ninth Schedule of the Federal list.

“There is no provision in the Federal Constitution’s Ninth Schedule that the state can extend oil in the federal list. We don’t challenge the concept of State Sales Tax Ordinance 1998 (SSTO) but we disagree with double taxation,” he said.

The High Court was told that the Petronas had been double-taxed because of the SST as the corporation had already committed to paying the annual five per cent cash payment or oil royalty to Sarawak.

“Petronas’ argument is that (the) constitutional arrangement does not support double taxation and that the Federal Sales Tax laws are already being applied on petroleum,” he said.

He insisted that the argument is over what subject matter can the state impose SST on Petronas and if it is going to impose it, how is the state going to do it.

“Some parts of the current State Sales Tax Ordinance 1998 (SSTO) is not constitutional and therefore not valid. Therefore we are saying that the notice of assessment are not valid,” he said.

Malik told the court that certain provisions in the SSTO, which was amended in 2018 to include taxation on petroleum products, was ultra vires the federal constitution, and hence null and void.

He argued that Petronas was not a “taxable person” in this context since it is a statutory body established under the Petroleum Development Act 1974 to regulate the activities of other oil companies.

Petronas had applied for the judicial review against the SST Comptroller, who is the first respondent, and the sarawak government as the second respondent.

It wants the court to decide whether Sarawak can impose SST on its petroleum products, namely crude oil, liquefied natural gas and condensates, which are forms of oil residue.

Earlier today, High Court Judge Azahahari Kamal Ramli said the judicial review hearing will be cut short from three days to two days as he will be in Kota Kinabalu on Wednesday.

Assisting Malik in the hearing is counsel Alvin Chong.

Sarawak is represented by State Attorney General Datuk Talat Mahmood Abdul Rashid and state legal counsel Dato Sri JC Fong.

The crux of Sarawak’s submission will depend, among others, on Article 95B of the Federal Constitution where it states that Sabah and Sarawak can make laws in regards to the SST which are deemed to include items in the state list, including petroleum.