Notices of assessment for state sales tax on petroleum products are invalid, says Petronas lawyer

KUCHING: The notices of assessment for state sales tax on petroleum products issued to Petronas by the Sarawak government are invalid and should be quashed because certain parts of the State Sales Tax Ordinance are unconstitutional, says Datuk Malik Imtiaz Sarwar.

The Petronas counsel said the state sales tax could only be imposed on matters in the state list under the Federal Constitution, while petroleum was a matter on the federal list.

"The state can impose sales tax, that we are not disputing. The question is over what subject matter.

"What we have argued is that the power to impose (state) sales tax is very narrow and confined by certain restrictions in the Constitution.

"The effect of that, we say, is that some parts of the State Sales Tax Ordinance are not constitutional and therefore not valid. Because those are relevant to the issuance of the notices, we're saying that the notices are also invalid," he told reporters after submitting his arguments in Petronas' judicial review proceedings against the state sales tax at the High Court here on Monday (Feb 3).

The national oil corporation is seeking, among others, a declaration of certain sections of the Ordinance as ultra vires to the Federal Constitution and null and void, and also an order of certiorari that the notices dated Aug 28,2019, Oct 7,2019, and Nov 13,2019, issued to Petronas be quashed.

It named the Comptroller of State Sales Tax and the Sarawak state government as first and second respondents.

Malik also said the constitutional arrangement does not support double taxation.

In this respect, he said there was already a federal sales tax law that applied to petroleum.

In addition, he said the State Sales Tax Ordinance covered more than just sales tax and arguably included excise, import and export duties.

"So for that and other reasons, we are saying that at this point, the notices are not valid and should be quashed," he said.

The hearing resumes before High Court Judge Azhahari Kamal Ramli on Tuesday (Feb 4) with submission from state legal counsel Datuk Seri JC Fong, who is representing the state government.