GST refunds 101 for beginners

Let me declare that I am no expert in government procedures and financial processes. However, in the past, I had several opportunities to be guided by the General Orders and some government circulars in preparing and writing articles and commentaries.

On and off, reference is made to such documents, but this time around, I was unable to sight anything to do with the on-going war of words related to the refunds of the goods and services tax (GST). They may be contained in some circular which may previously have been marked as “Sulit” or “Rahsia”.

By training, whenever possible, we do analogies based on everyday situations and common sense when it comes to complex issues affecting the man in the street. Using simple language - without pompous words or legal jargon - will help put the issue in the right perspective.

For purposes of discussion, we shall refer to the owner of an upmarket shoe importer as Nahar. A new consignment of shoes had arrived from Switzerland when a regular retailer, Ah Heng walked in.

“Boss, can’t sell you the shoes yet because my people have not worked out the costs, the insurance, freight charges and the Customs duty payable,” said Nahar.

Ah Heng replied: “I need the shoes today as I have orders from one or two politicians who want to show-off at a garden tea-party later at the palace.”

Nahar took out a calculator, punched are few keys and said: “Boss, agak agak, (approximately) it will cost about RM8,000. You pay first but I will make a refund once we establish the selling price.”

The deal’s done. Both were happy. Nahar makes out a receipt which stated: “’E & OE’ (Errors and omissions expected). All refunds will be made within 14 working days.”

The next day, the importer’s book-keeper, Maniam, calculated all the costs and taxes. He fixed the selling price at RM6,000. He banked RM2,000 which had to be returned to Ah Heng. This and other refunds were kept in a separate account to facilitate easy payments.

Azman, who managed the finances of the importer, noted that account had a huge balance consisting of not only money meant for Ah Heng but refunds due to many other retailers. He used the money to pay the office rental, EPF contributions and utility bills for the company which had been outstanding for months. He informed Nahar of the same – because Azman had no such authority.

When Ah Heng turned up for his refund, Maniam told him that there was no money in the account. Failing to get his refund, he confronted Nahar. “Ask Azman, he made the decision,” was Nahar’s answer.

Ah Heng was not happy. Nahar, he insisted, should be answerable because he is the owner and wants to know if he had instructed Irwan to use the money.

On-going dispute on GST refunds

This, in a nutshell, is the on-going dispute on the GST refunds between two finance ministers - past and the present. If Najib Razak is Nahar; Ah Heng is Lim Guan Eng; Maniam is Customs chief Sobramaniam Thulasi; and Azman is former Treasury chief, Mohd Irwan Serigar Abdullah (photo), everything will fall into place.

It would be wrong to assume or insinuate that anyone had dishonestly misappropriated any money. There seems to be two schools of thought. One is that by not transferring monies from the Consolidated Fund to the GST Refunds Trust Account, it could have been merely an administrative error or shortcoming or oversight. The second is Lim’s contention that it amounts to breach of trust.

We will leave it to the legal eagles to debate if the failure to keep and maintain the Trust Account (for refunds) amounts to criminal breach of trust (CBT). But one issue can be established: Money supposed to be used for refunds “went missing” and may have been used for other legitimate purposes. However, this is merely a mitigating point.

Perusing the Penal Code, Section 405 is explicit on CBT. As an illustration, it gives this example:
A, a collector of Government money, or a clerk in a Government office, is entrusted with public money, and is either directed by law, or bound by a contract express or implied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust.

The money, Lim (photo) said, was not refunded due to the previous government’s failure to transfer sufficient amounts to the Trust Account.

“This represents a breach of trust because the previous government had used the money belonging to the taxpayers without their permission as they deliberately concealed the expenditure deficit to fund its spending,” he was quoted as saying.

Lim maintained that GST refunds should have been made within two weeks as stipulated by the law, but that there are still arrears from 2015.

This is a serious charge, which has prompted police investigations. As of May 31, refunds amounting to RM19.397 billion have not been made to 121,429 individuals and companies.

While we wait for the police to wrap up investigations and send its papers and related documents to the Attorney-General’s Chambers for advice, we the citizens, as lesser mortals, can only watch with folded arms as the next episode unfolds and comes into public domain.

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R NADESWARAN says while the debate goes on, the victims are those who have been waiting for refunds – some for more than three long years. Comments: citizen.nades@thesundaily.com - Mkini