AUDIT REPORT The National Audit Department has found the Royal Malaysian Customs Department’s processing of applications for a special sales tax refund to be slow and inefficient.

It found that even eight months after the closing date for applications on Sept 30, 2015, only 1,863 (73.3 percent) of the claims had been processed.

The remaining 677 (26.7 percent) applications still outstanding amount to claims for RM555.86 million, said the report released today.

“In the audit’s opinion, the performance in managing the special refund is inefficient because, as of May 31, 2016, 26.7 percent of the applications received by the Customs Department up to Sept 30, 2015 have yet to be processed,” the report said.

The findings are part of the Auditor-General’s Report 2015 Series 2 report, which was tabled in Parliament today.

The sales tax special refund scheme allows businesses to apply for sales tax refunds for goods held on March 31, 2015, which is the eve of the day where the sales taxes were replaced with the goods and services tax (GST).

The refund scheme under Section 190 of the Goods and Services Tax Act 2014 is meant to avoid double-taxation on the goods. Applications for refunds were open from April 1, 2015, until Sept 30, 2015.

The audit report said that the auditors had also sampled 346 of the refund applications.

It found that 95 (27.5 percent) of those applications took more than the 14-working day deadline to process. The delays range from one to 72 days.

A further 16 applications (4.6 percent) from the sample had incomplete information, and the auditors were unable to ascertain whether they had been any delays.

In addition, mistakes had been found in 13 of the applications that had been approved. In each case, this in resulted in the Custom Department overpaying the claimants.

For these 13 cases, the Customs Department had approved a total of about RM1.2 million in refunds, but the auditors found that the amount eligible is only RM637,882 - a discrepancy of RM573,850.

In response to the findings, the Customs Department said corrective action has been taken on these cases, and the refunds have been revised to a total of RM480,836.

‘Many applications received at once’

The Customs Department also explained that there had been delays in processing refund applications in Negri Sembilan and Pahang because its branches there received many applications at once, causing difficulties for the GST audit officers.

“Other factors causing delays are that the verification of the claims requires various documents, physical inspections on vast quantities of stock and inspections on stocks held in separate places.

“Action has been taken to speed up the process,” it said.

Overall, the audit found that the 1,217 applications approved amounted to RM102.7 million as of May 31 this year, compared with the estimated RM384.10 million being claimed.

A total of 646 applications amounting to RM73.43 million in claims had been rejected.

Of the sum approved, RM27.52 million (26.8 percent) have already been disbursed, while a further RM75.19 million would be released to claimants in instalments.

According to a survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) released on July 14, 79 percent of the 806 small and medium enterprises sampled claimed that their applications for the special sales tax refund were rejected.