a. The Goods and Services Tax (GST) was introduced on 1st April 2015 to replace the sales and service tax. To avoid double taxation, a special refund was allowed for sales tax imposed on goods held on hand on 31st March 2015. The claim for special refund must be made within 6 months from 1st April 2015. Until the due date (i.e. 30th September 2015), the Royal Malaysian Customs Department (RMCD) received a total of 2,540 applications for goods held on hand valued at RM13.255 billion with special refund claims amounting to RM732 million.
b. Audit carried out between October 2015 to January 2016 revealed that generally the special refund scheme has been conducted properly in accordance to subsection 190(1) of GST Act. However, there were some weaknesses as follows:
i. inefficient management of special refund claims where: • as at 31st May 2016, a total of 1,863 (73.3%) applications has been processed and the 19 remaining 677 (26.7%) applications has yet to be processed involving claims amounting to RM555.86 million. From the total applications that has been processed, 1,217 (65.3%) applications has been approved with refunds amounting to RM102.71 million while 646 (34.7%) applications has been rejected involving claims amounting to RM73.43 million; and • a total of 95 (27.5%) applications out of 346 audit samples took more than 14 working days to process, resulting in delays between one to 72 days.
ii. there were some lax in the reviewing and approving process of 13 (3.7%) applications out of 346 audit samples where a sum of RM0.59 million was erroneously approved.