Sarawak cannot impose sales tax on petroleum products, says expert

Shad Saleem Faruqi says matters concerning petroleum products are in federal hands.

KUCHING: The Sarawak government’s move to impose sales tax on petroleum products may hit a snag as the state can only impose the tax on items under the state list of the Federal Constitution.

Constitutional law expert Shad Saleem Faruqi said petroleum products are stated in the federal list under the Ninth Schedule of the constitution.

This follows a dispute between Petronas and Sarawak on the state’s rights to impose sales tax on petroleum products under Article 95B(3) of the Federal Constitution and Sales Tax Ordinance 1998.

“Petronas has argued that Sarawak can acquire the power to impose sales tax but only over matters that are stated in the state list,” Shad Saleem said in a lecture on “The Spirit of the Malaysia Agreement 1963 (MA63) in our Constitution” here today.

“Petroleum products are in the federal list. Therefore, any regulation or dealing on petroleum products is also in federal hands,” he said.

He said the state could impose sales tax only on items in the state list such as escheat, treasure trove, agriculture, forests, markets and fairs, theatres, cinemas, places of amusement, turtles and riverine fishing.

“In 1963, petroleum and gas were not significant issues. I think the lawyers from Sabah and Sarawak back then had let the people down.

“However, Sabah and Sarawak can ask the federal government to renegotiate on this matter,” he said.

It was reported earlier today that Sarawak Chief Minister Abang Johari Openg said he would make Petronas pay the 5% sales tax on the export of petroleum and petroleum products from its operations in Sarawak.

“I will fight to the last in order to get Petronas to pay. Under our law (Oil Mining Ordinance), Petronas has to pay the sales tax. That is our right,” he was reported to have said. - FMT