The Sarawak government has the constitutional right to levy State Sales Tax (SST) on the sale of petroleum products based on the Article 95B(3) of the Federal Constitution, Assistant Minister in the Chief Minister's Department Sharifah Hasidah Sayeed Aman Ghazali clarified.
The SST, effective since January, was announced during the tabling of the 2019 state budget last year.
Responding to an article published by a news portal, Sharifah Hasidah (photo), who is in charge of the ministry’s Law, State-Federal Relations & Project Monitoring portfolio, said the news report contained a number of inaccurate statements.
In the article published on Monday, the Malaysian Reserve, referring to Article 96 of the Federal Constitution, had posted a question on whether it was permissible for the state to impose sales tax on petroleum products when it comes under the Federal List of the Federal Constitution.
Sharifah said the State Sales Tax Ordinance 1998 was passed pursuant to Article 95B(3) of the Federal Constitution.
“Therefore, the state legislature's constitutional authority to pass laws on SST is not dependent on Article 96 as contended in the Malaysian Reserve,” she said in a statement in Kuching today.
According to Article 95B(3), the legislature of Sabah or Sarawak may also make laws for imposing sales tax, and any sales tax imposed by state law in the state of Sabah or Sarawak shall be deemed to be amongst the matters enumerated in the State List and not in the Federal List.
She further explained that the state needed the additional source of revenue from the SST to drive its development agenda.
She noted that according to publicly available data, from 1976 to 2017, total revenues derived from the production and sale of oil and gas within Sarawak territory amounted to RM550 billion, of which only five percent or RM33 billion was paid to Sarawak.
“Sarawak has therefore contributed very significantly to federal coffers from its rich oil and gas resources since 1976. All the natural gas derived from Sarawak were converted to LNG for export to Japan, Korea and Taiwan, earning very significant foreign exchange for the Malaysian government.
“Hence, the imposition of SST on petroleum products is a discharge of the state government's fiduciary duty to Sarawakians to seek a fairer share of the revenues from oil and gas produced in Sarawak,” she said.
Based on the present production rate of oil and gas in Sarawak and at current global oil prices, the amount is RM40 billion annually. The SST will yield approximately RM3 billion additional revenues for the state, she added.