Insights Into The GST Appeal Process

The much-anticipated goods and services tax ("GST") replaced Malaysia's sales and service tax in April this year. Under the new regime, all goods and services supplied in the country (unless they are zero-rated, exempt supply or out of scope) are subject to GST at the rate of 6% at every stage of the supply chain. Although GST is conceptually a simple consumption tax, confusion and uncertainty arising from the existing legislation (especially the wide zero-rated and exempt supply list) have made it a fairly complex tax in Malaysia.1

This is coupled with technical issues that will arise due to differing standpoints adopted by the Royal Malaysian Customs Department ("Customs Department") and GST practitioners. The Goods and Services Tax Act 20142 ("the GST Act") also contains a comprehensive penalty regime which, from its drafting and intent, may be read to be punitive in nature. During its roadshows nationwide, the Customs Department appeared to have assured businesses and GST practitioners that it would adopt an educational approach, at least in the first year of GST implementation, and, as such, the penalty provisions under the GST Act would be applied sparingly. This assurance is not legally binding and, in any event, the Customs Department is not estopped from applying the full strength of the law if it wishes to impose a penalty. 3 This article will cover two major avenues of appeal available to taxpayers: the GST Appeal Tribunal and the judicial review application.

GST Appeal Tribunal

If a taxpayer is aggrieved by a Customs decision in respect of GST matters, the ordinary route envisaged by Parliament is for him to appeal to the GST Appeal Tribunal ("the Tribunal"). The establishment of the Tribunal is provided under s 125 of the GST Act. The Tribunal has the jurisdiction to determine appeals in respect of GST matters except on the matters specified in the Fourth Schedule. 4 Parliament has not provided a reason for making this exception and neither does the GST Act provide any alternative appeal remedy to taxpayers who may be aggrieved by a decision of the Customs Department (including the Director-General of Customs). It is unfortunate that the GST Act is silent on this. The author submits that Parliament should have either provided an appeal process for such matters, or at least acknowledged that such matters could be appealed by way of judicial review application. It is the author's opinion that taxpayers who are aggrieved by decisions in respect of matters specified in the Fourth Schedule may seek legal recourse by way of judicial review application, which is discussed below.

The salient features of the Tribunal are:

Membership

The membership of the Tribunal is rather wide and appointment is determined by the Minister of Finance. 5 The chairman and deputy chairman of the Tribunal will be appointed from among the officers attached to the Judicial and Legal Service. 6 The minister is required to appoint no fewer than five members whom in his opinion have wide knowledge or extensive experience in any field of activities relating to GST, customs or taxation. 7

As at the time of writing, the author is unaware of any appointment being made by the Minister to the Tribunal. Tribunal members shall hold office for a term not exceeding three years and are eligible for reappointment up to three consecutive terms. 8 The Minister shall also determine the remuneration and other terms and conditions of the members of the Tribunal, including the chairman. 9 In the following circumstances, the appointment of a member of the Tribunal under s 128(1)(b) of the GST Act may be revoked by the Minister: 10

(a) his conduct, whether in connection with his duties as a member of the Tribunal or otherwise, has been such as to bring discredit to the Tribunal;

(b) he has become incapable of properly carrying out his duties as a member of the Tribunal;

(c) there has been proved against him, or he has been convicted of, a charge or charges in respect of:

(i) an offence involving fraud, dishonesty or moral turpitude;

(ii) an offence under any law relating to corruption;

(iii) an offence under this Act, the Customs Act 1967 or the Excise Act 1976; or

(iv) any other offence punishable with imprisonment for more than two years;

(d) he is adjudicated a bankrupt;

(e) he has been found or declared to be of unsound mind or has otherwise become incapable of managing his affairs; or

(f) he absents himself from three consecutive sittings of the Tribunal without leave of the chairman.

A member appointed by the Minister may also resign from his office by giving a three-month notice. 11

Section 133 of the GST Act provides for the appointment of a secretary and an assistant secretary to the Tribunal to ensure the functions of the Tribunal are discharged accordingly. 12 The officials will report to the chairman of the Tribunal. 13 Like any other tribunal, no action or suit could be instituted or maintained in any court against the members of the Tribunal. 14

Hearing of appeals

Any taxpayer aggrieved by the decision of the...