Transfers of GST revenue to the Consolidated Fund cannot be theft or a breach of trust; GST refunds are not guaranteed

by Ganesh Sahathevan

Former prime minister Datuk Seri Najib Razak is pictured at the Kuala Lumpur High Court July 15, 2019. — Picture by Firdaus Latif

While it is true that the administration of any Goods and Services Tax system is complex, in simple terms, the tax is revenue to the government concerned, and traders registered for GST purposes are in effect collection agents for the government. Whether they receive a GST refund is dependent on whether their input taxes( i.e. the GST they pay) exceeds their output taxes (i.e. GST they collect).

This statement on the GST Consolidated fund reported by the Malay Mail does not reflect that simple fact:



Attorney General Tommy Thomas said channelling good and service tax (GST) revenue directly into federal government’s consolidated revenue account was wrong.

In his correspondence to the Public Accounts Committee (PAC) last October, Thomas pointed out that this was a breach of fundamental trust law principles and trust accounting requirement as it violates the Section 7 of the Financial Procedure Act 1957 and Section 54 of the GST Act 2014, Malaysiakini reported today.

“The GST regime is based on the fundamental precept that taxpayers will receive a refund for the amount of GST they pay in the course of producing taxable supplies.

“Parliament’s intention is that taxpayers receive this refund. The statutory entitlement to a refund and the creation of the GST Trust Fund are evidence of that intention,” he said.

“By failing to ensure that taxpayers received their refunds, the former government failed to give effect to Parliament’s intention,” Thomas added.

Thomas’ reply was appended to the PAC’s report on the delayed RM19.4 billion in GST refunds released today.

The PAC concluded that no GST fund was lost, but stated that GST Trust Fund was insufficiently funded because it was used for other purposes.

The PAC is right in that the GST Trust Fund is akin to a bank or insurance company where there is an obligation to meet depositors or policyholders demands.However that indeterminate demand does not prevent the bank or insurance company from investing the money held in their accounts. 

The duty to ensure Tiley payments to depositors, policyholders, and in the case of those registered for GST purposes is a matter separate from the right of the recipient of those funds, in this case the Government of Malaysia, to utilise those funds for its legislated purposes.

Clearly, channelling the GST revenue  into the Consolidated Fund is well within the legislated purposes.

END