This item has been updated since initial publication.
By Nur Azweena Azhar
This was the common view shared by all three panellists at the Goods & Services Tax (“GST”) session held yesterday, that all lawyers should take note of, prepare and be informed about tackling potential problems in relation to GST. Datuk DP Naban, Senior Partner and Head of Tax, GST & Private Clients, Lee Hishammuddin Allen & Gledhill, who moderated this session, urged fellow lawyers to take the initiative to understand the mechanism of GST operations. This, he said, would assist lawyers in managing their practice affairs smoothly when it kicks in from 1 Apr 2015. Although GST is often touted as a replacement for the sales and service tax, there is more to it as evident from the Royal Malaysian Customs Department’s (“Customs Department”) very own GST Guide On Legal Practitioners.
The first speaker for this session entitled "GST and the Legal Profession — What You Need to Know", Ng Swee Weng, Senior Advisor, Accounting & GST, of BDO Malaysia, highlighted the top five most significant impacts of GST on the legal practice. In his presentation, he briefly discussed section 187 of the GST Act 2014 (“GST Act”) which covers the concept of reviewable and non–reviewable contracts under the GST regime. Mr Ng also did not shy away from the important topic of offences and penalties under the GST legislation. As Members of the Bar, lawyers were urged to take note of the severe sentencing that some of the offences attract under the GST Act. For instance, GST evasion attracts up to seven years’ imprisonment, while income tax evasion only attracts three years’ imprisonment. In order to assist lawyers to maximise their input credit, the speaker also touched on the topic of taxable or exempt supply, as well as record–keeping, which has become an important aspect of the tax regime in Malaysia, especially since the introduction of the self–assessment system.
Mr Ng also spoke on information and communications technology ("ICT") matters where he named some of the GST accounting software that one could utilise to manage their records efficiently for this purpose. In short, Mr Ng introduced lawyers to the GST mechanism, and through his presentation, delegates picked up new terms, which form the backbone of GST, such as “out of scope”, “taxable supply”, “zero–rated”, “exempt supply”, “standard rated” and “tax invoice”.
Having handled a number GST audits involving professionals, including lawyers, in Australia, Jeff O’Connell, Executive Director, Tax & GST, BDO Malaysia, was the best choice to share the practical impact of GST on lawyers. He emphasised the usage of defined GST terms in contracts and matters one should consider when engaging with one’s GST consultant, and if need be, the Customs Department. Although he is not a lawyer by training, Mr O’Connell discussed several significant Australian case laws on GST, including the Cityrose and Westley Nominees case. Mr O’Connell added that GST litigation in Australia averaged a rate of 38% each year, where nearly a quarter of the disputes involved property–related matters. Delegates also found Mr O’Connell’s sharing of his experience with the Australian Taxation Office especially insightful as he spoke with regard to the perspective of law enforcers and their thinking processes.
In summing up his paper, he posed the question of whether taxpayers and revenue authorities could explore the potentials of alternative dispute resolution to resolve their disputes expeditiously and amicably, in light of the growing number of GST litigation. Mr O’Connell also spoke briefly on the Australian GST litigation process, which according to him, ordinarily commences at the Administrative Appeals Tribunal.
Next, S Saravana Kumar, Partner, Tax, GST & Private Clients, Lee Hishammuddin Allen & Gledhill, covered two sub–topics in his presentation. He addressed the topic of reviewable and non–reviewable contracts. He explained that a “reviewable contract” is a written contract which provides the opportunity for the general review of the consideration or a change to the consideration of goods and services to be supplied under the contract. To this he added that the review opportunity must be a total review, and not just a specific part of the consideration payable under the contract. Mr Saravana cited section 187(2) of the GST Act, which provides that goods and services supplied under a reviewable contract entered into not less than two years before 1 Apr 2015 could be zero–rated until its first review opportunity, or for a period of five years after 1 Apr 2015, whichever is earlier. Therefore, Mr Saravana urged lawyers drafting and scrutinising contracts to examine under which category a contract falls under. He also highlighted the Singapore cases of Ma Ong Kee and Kuo Ching Yun as examples of GST litigation in respect of determining GST liability in sale and purchase agreements.
With regard to the Australian GST litigation process and the Administrative Appeals Tribunal mentioned earlier by Mr O’Connell, Mr Saravana delved into the subjects of GST Appeal Tribunal, appeals by way of judicial review, and application for refund of overpaid or erroneously–paid GST. In this context, he was a bearer of good news, as unlike the Customs Appeal Tribunal, the GST Appeal Tribunal does not prohibit lawyers from appearing before them. However, all the matters listed under the Fourth Schedule of the GST Act are not appealable to the GST Appeal Tribunal. Hence, under such circumstances, an aggrieved taxpayer could challenge the decision of the Customs Department by way of judicial review. Mr Saravana pointed out that the existence of the GST Appeal Tribunal should not prevent taxpayers from commencing judicial review proceedings in exceptional circumstances; here he related his recent experience in the Metacorp Development case.
In conclusion, much has been said on GST in recent months. After many years of speculation, it finally appears that GST is certainly to be an integral part of the Malaysian economy from 1 Apr 2015 onwards. As the Customs Department and other public sector agencies are gearing up for the implementation of GST, it is high time for legal practitioners, like many other arms of the private sector, to prepare themselves for the challenges and opportunities awaiting them.