Unpaid refunds reach RM19.4b, despite more than RM110b collected since April 2015, but only RM1.5b left for refunds

BY P PREM KUMAR & DASHVEENJIT KAUR / Graphic By TMR

The government has revealed a staggering RM18 billion in Goods and Services Tax (GST) input tax, which was meant as refunds to businesses, has gone “missing” from the balance sheet.

The unpaid refunds from the consumption tax to registered companies had reached RM19.4 billion since the levy was imposed in April 2015, despite more than RM110 billion collected since the introduction of GST. The refunds were supposed to be paid within 14 days of any claims as stipulated in the GST Act 2014.

Finance Minister Lim Guan Eng said the previous government had used about RM18 billion from the refundable input tax in the dedicated fund for other purposes.

He claimed that poor fiscal discipline and lack of operating cashflow were the reasons behind the missing input tax refunds.

“The input tax, which was supposed to be deposited in a refund reserve, was instead channelled to the consolidated fund which allowed the previous government to spend the money according to their wish,” he told the Dewan Rakyat yesterday.

He said the current refund pool of fund now stood at RM1.48 billion, leaving with the government a short-fall of RM18 billion.

Lim said the input tax had been used to portray a healthy government current account balance.

The refund gap was revealed when he tabled the GST (Repeal) Bill 2018 for a second reading yesterday. Lim said the RM18 billion financial gap was the main reason why the previous government failed to refund the input tax within 14 days as promised.

Lim said the RM19.4 billion in outstanding refunds was up to May 31, 2018, since 2015. Businesses had submitted refund claims of RM9.1 billion or 47% of the total amount this year, 35% (2017), 15% (2016) and 3% (2015).

“Verified accounts from the Royal Malaysia Customs Department showed that not only guidelines were not adhered to in the refund mechanism, but elements of corruption were evident,” Lim said.

Despite the abolishment of the unpopular consumption tax after Parliament’s approval, the minister gave his assurance that the current Pakatan Harapan government will honour the RM19.4 billion outstanding input tax refund claims through a specific mechanism.

“We do not currently have the financial resources to find the RM19.4 billion to repay the input tax.

“But our stand is to repay the outstanding claims as it is upon moral imperative for us to pay back the people’s money. Remember that there were shops and businesses which had to close because of GST and the unpaid input tax claims,” he added.

The government will start the refund process next year after the formulation of the repayment mechanism.

Lim, at the Dewan Rakyat on Tuesday, had claimed that the money for the GST refunds had been “robbed” by the previous government, creating delays in the repayment. He claimed that the refund fund had been spent by the previous government.

Lim’s claims had created a stir at the Dewan Rakyat with MP Khairy Jamaluddin (BN-Rembau) demanding for the finance minister to back his accusations with proof.

The government claimed that the failure to refund companies on the input tax had caused prices of goods to spiral as businesses face financial and cashflow difficulties.

Meanwhile, Khairy and MP Datuk Seri Mustapa Mohamed (BN-Jeli) said the disappearance of the RM18 billion refund fund should be treated as crime if the allegations of misappropriation by Lim is true.

Khairy said the government should report the misappropriation to the Malaysian Anti-Corruption Commission (MACC) for a proper judicial process to take place.

But he wants Lim to explain whether the RM18 billion of input tax credit was really missing from the dedicated fund or is it a matter of technicality.

“The minister agreed that some refund applications were not in line with the Customs guidelines.

“So, he must give us a breakdown on how much of the refunds were rejected, and how much allocation was given to the Customs for refund purposes,” he said.

Mustapa said Lim’s allegation is serious and must be addressed.

“The RM19.4 billion is a huge amount and the words used to describe the missing fund were very serious.

“Although it might not be a theft as alleged, we have to do a proper inquiry into the matter, maybe an open inquiry,” said the former minister.

The Sales and Services Tax (SST), which is expected to be introduced on Sept 1, will replace GST.

The introduction of SST, rising crude oil prices and extra dividends from government-linked companies are expected to generate an additional RM14.4 billion in government revenue this year.

The Pakatan Harapan administration had promised to repeal GST if it secures Putrajaya in the 14th General Election in May.