Saturday, September 26

Sarawak and Petronas resolve dispute over SST, oil company to pay up

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KUCHING: The Sarawak government and Petroliam Nasional Berhad (Petronas) have reached an agreement on the State Sales Tax (SST) with the national oil corporation agreeing to pay RM2 billion owed to the state.

A joint statement issued by both parties today said they were dropping their legal suits against each other and in addition, Sarawak had agreed to reduce the SST rate imposed on the corporation from the current five per cent in phases.

“Both parties agreed that this would be the best approach in settling these issues as well as to create a more stable business environment and investment.

“The approach would also enable continuous development in the national oil and gas industry particularly in this current unstable market situation,” said the statement signed by Assistant Minister in the Chief Minister’s Department (Law, State-Federal Relationship and Project Monitoring) Datuk Sharifah Hasidah Sayeed Aman Ghazali and Petronas chairman Datuk Ahmad Nizam Salleh.

It said Petronas agreed to withdraw its appeal against the Kuching High Court decision on March 13, 2020, to dismiss its application for judicial review on the state issuance of Notices of Assessment for SST on petroleum products.

The State government, on its part, agreed to drop its claims against Petronas to recover the SST, the statement said.

As such, Petronas via its subsidiary companies will pay in full to the Sarawak government the five per cent SST on petroleum products amounting to RM2 billion for the year 2019, the statement said.

“The Sarawak government and Petronas agreed that that the rate of the SST on petroleum products provided for by the State Sales Tax (Taxable Goods and Rate of Tax)(Amendment)(No. 2) Order, 2018 (“Order 2018”) will be reduced in phases.

“The State government has also agreed that the SST is only limited to petroleum products by virtue of Order 2018,” the statement said.

However, it said all previous agreements between the two parties made under the Petroleum Development Act 1974 (act 144) are still valid and enforceable and Petronas is still recognised as having full ownership and control over national oil and gas development, in line with the Federal Constitution.

The statement added that Petronas would together with the State government continue to develop the oil and gas industry in Sarawak.

At the same time, it said Petronas would continue its negotiation with the State government to enable it to invest actively in the state’s oil and gas industry on the basis of commercial terms and this includes the operation level in the state.

To ensure that the commercial solution was implemented smoothly, the Federal Minister of Works and Minister of Finance has been tasked to chair a working committee overseeing the matter, said the statement.

Chief Minister Datuk Patinggi Abang Johari Tun Openg, in an immediate reaction, described the agreement between the two parties as a “milestone”.

“With this solution, the business and investment situation will be more stable and further boost the industry in Sarawak. The Sarawak government is a practical government and assures the players in the oil and gas industry that it will always be business friendly,” he said in a statement.

In this respect, he said the state government was committed to working with the Federal government and Petronas in further discussions to reach an agreement on the other outstanding issues.