Sales tax on petroleum products will not burden consumers — Abang Jo

KUCHING: The imposition of sales tax on petroleum products will not burden the people in Sarawak, reassures Chief Minister Datuk Patinggi Abang Johari Tun Openg.

He reiterated that the sales tax would be imposed on petroleum products that are for export only.

“I want to make a clarification for everybody’s consumption. There has been a lot of misunderstanding on the sales tax.

“Sales tax is only imposed on one point; we only impose sales tax on export not for internal or domestic uses,” he told reporters after witnessing the sales and purchase agreement of methanol between Sarawak Petchem Sdn Bhd and Petronas Chemicals Marketing (Labuan) Ltd here Friday.

He said for example in the LNG, it starts from the raw or natural gas before it goes to the LNG plant, which then processes the gas either for export or domestic market.

Some people in the industry, he said, had interpreted that five per cent would also be imposed on raw gas that goes to the LNG plant, meaning altogether it will be 10 per cent.

“But that is not the case. The product to be taxed is only the LNG gas for export. There is no multi-layer sales tax. It’s only one point; that is the export point.

“Many people think that gas which are sold internally or locally will be taxed. But no tax will be imposed on the products that are sold within the boundary of Sarawak.

“But once it is for export; that is where we tax the product 5 per cent. Not for domestic use, even

I want to make a clarification for everybody’s consumption. There has been a lot of misunderstanding on the sales tax. Sales tax is only imposed on one point; we only impose sales tax on export not for internal or domestic uses. — Datuk Patinggi Abang Johari Tun Openg, Chief Minister

for manufacturing,” he said.

The Sarawak government’s decision to impose the sales tax was in compliance with Schedule 10, Part V, Section 7 of the Federal Constitution; hence, it is constitutionally legitimate for the state to impose State Sales Tax.

The State Sales Tax Ordinance 1998 allows Sarawak to impose sales tax on goods and services.

Under the broad category of taxable petroleum products, crude petroleum tops the list as it is predominantly exported. The crude oil extracted from Sarawak is of premium grade, i.e. light and sweet crude, which is for export and fetches premium price.

The second in the category is natural gas, which is predominantly sold to LNG plants for processing. The other categories are liquefied natural gas, chemical-based fertilisers and gas-to-liquid products such as kerosene, naphtha, and wax, which are also mainly for export.