GST refunds should be in trust account

> Koong says idea of trust account was mooted by association for safekeeping by govt pending verification and payout of claims

PETALING JAYA: The “missing” RM18 billion revolves around a trust account, mooted by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), which was initially set up by the Ministry of Finance to manage a refund exercise which numbered in the billions.

According to ACCCIM Tax Committee head Koong Lin Loong ( pix), the setting up of the refund or a trust account was put forward by the association to hold the monies in the interim period that the authorities needed to verify claims by businesses.

The trust account was made up of a percentage of the output tax, the GST collected from customers. For this reason, Koong said the trust account should have more funds than the refundable amount.

Koong, who was a member of the GST taskforce, explained that if RM10 GST was collected, RM3-4 would have been channeled into the trust account, while the remainder serves as the government’s net income. The government collected a total of RM44 billion from GST in 2017.

Koong said while the trust account was successfully implemented the question remains whether it was successfully “executed”.

Finance Minister Lim Guan Eng on Wednesday said RM18 billion was missing from the trust account which should have RM19.5 billion, which is the amount of refunds claimed.

Bernama reported that former Treasury sec-gen Tan Sri Dr Mohd Irwan Serigar Abdullah said that all GST proceeds were instead placed in the Consolidated Fund before being channeled to the trust fund to repay GST claims based on the request by the Royal Malaysian Customs Department.

He said it was understood that there were RM15 billion outstanding claims for last year that needed verification, investigation and auditing process to ensure there was no fraud or false claims.

Koong said complaints from businesses on goods and services tax (GST) refunds to the Finance Ministry and Customs started pouring in from end of 2015 after tax collection mounted leading to overdues in the billions.

“I think mostly from 2016-2017 (refund problems started). In 2015 Customs did pretty well in refunding the input tax because at that time the refund was not much because the tax collection period was only nine months and the businesses were still picking up the GST mechanism. In 2016 and 2017, it piled up as the net collection also increased tremendously and more companies were also registered for GST,” he said. There were 472,000 companies registered for GST.

Refunds are generally provided at the latest, a month after the taxable period. Companies making a turnover of more than RM5 million can file for their claims monthly, lower than RM5 million at the end of every quarter, while for special cases refunds are after six months.

For complaints, Koong said authorities would usually check and expedite the process but there could also be a possibility that some cases were not dealt with, hence leading to the accumulation. There would have also been rejection to refunds. Refunds could range from a few hundreds to few millions.

If a company’s input tax, GST paid by businesses for goods and services, is more than output tax for that particular taxable period, the company is eligible for an input tax refund.

“While some companies requested for their input tax to be rolled over because the amounts were small, some requested for refunds for cash flow purposes,” he said.