Petronas claims Sarawak sales tax law ‘unconstitutional’

The Sarawak government is seeking payment from Petronas on the state sales tax on petroleum products.

KUCHING: Petronas has claimed that some parts of the state Sales Tax Ordinance 1998 which require the national oil company to pay the 5% sales tax on petroleum products to Sarawak are “unconstitutional”.

Petronas lawyer Malik Imtiaz Sarwar.

Therefore, the notice of assessment issued by the Sarawak government to Petronas, seeking payment of the state sales tax on petroleum products, was also considered to be invalid, said Petronas lawyer Malik Imtiaz Sarwar.

“The power to impose the state sales tax is only applicable to matters that are in the state list and petroleum is under the federal list.

“The constitutional arrangement does not support double taxation because Petronas is charged with the federal sales tax that applies to petroleum,” he said after the first day of hearing of Petronas’ judicial review application against the state sales tax at the High Court here, today.

Therefore, he said Petronas was looking to quash the notice of assessment issued by the Sarawak government for the payment of the 5% sales tax on petroleum products.

Malik said Sarawak’s power to impose sales tax over its petroleum products was also “narrow” and “confined by certain restrictions in the Constitution”.

“Our argument is that it should be narrowed but the state government said the state sales tax can be imposed on anything that it considers to be appropriate,” he added.

Sarawak had imposed a 5% sales tax on its petroleum products on Jan 1 last year under the state’s Sales Tax Ordinance 1998.

However, Petronas is said to be the only oil and gas company operating in the state which has failed to pay the tax.

Sarawak has sued Petronas for unpaid state sales tax and penalties amounting to RM1.3 billion.