KUALA LUMPUR (Aug 25): Petroliam Nasional Bhd (Petronas) on Thursday) succeeded in its bid to quash a bill of demand issued by the Royal Malaysian Customs Department for allegedly underpaying RM14.8 million in goods and services tax (GST).
 
The High Court allowed the national oil company's application for a judicial review of the imposition of the GST for the supply of  ethylene made by Petronas through its subsidiary Petronas Chemicals Ethylene Sdn Bhd to Idemitsu SM (Malaysia) Sdn Bhd between April 1, 2015 and Aug 31, 2019,

Petronas claimed that the ethylene supplies were delivered to overseas buyers and this was supported by the filing of the K2 Customs form, used for exports for dutiable and non-dutiable goods.

The company argued that the ethylene was exported and therefore  deemed as zero-rated supply that is free from GST, as provided for by Section 17(1) (b) of the Goods and Services Tax Act 2014.

Disputing Petronas' reading of the legal provision, the Customs Department proceeded to issue the bill of demand on Dec 11, 2020, insisting that the ethylene involved were “supplies made in Malaysia” and not exports.

During the judicial review hearing, federal counsel M Kogilambigai — representing  the Customs Department and its director-general who had been named as respondents by Petronas — argued that based on the tax invoices issued by the Petronas subsidiary, the ownership of ethylene had transferred from Petronas to Idemitsu before it was shipped or exported.

Hence, she said Petronas should be subjected to the 6% GST as the department considered the ethylene as supplies made and sold in Malaysia, and the real exporter was Idemitsu and not Petronas.

Petronas, which was represented by S Saravana Kumar and Amira Rafie from Messrs Rosli Dahlan Saravana Partnership, told the court that the imposition of GST was made on the supply of goods that were supplied overseas and not on the ownership of the ethylene.

They further argued that the K2 form filed by Petronas was proof their client was the exporter of ethylene and should be allowed to enjoy the benefits of the GST zero-rated exemption.

Justice Datuk Wan Ahmad Farid Wan Salleh, in delivering the decision online on Thursday, agreed with Petronas that the Customs Department was wrong in raising the bill of demand in relation to the goods that had already been exported.