Delays in payment of GST Refunds are posing challenges for exporters
A key feature of Malaysia's economy is its export focused manufacturing base, a sector that relies heavily on high volumes to manage tight margins and cash flow constraints. The introduction of the GST was intended to boost this industry as exports would not be taxed and would remove the cost of indirect tax from the supply chain.
However, the beneficial effects of the efficiency of the GST is contingent on the ability of these exporters to receive this GST back as quickly as possible so that it does not impact on their cash flow to any significant extent. As exports are not taxed, exporters are entitled to a GST Refund for GST incurred on their local costs. This should be payable within 14 working days of the GST Return being submitted electronically.
Having said that, the practice to date has fallen short of these time frames for most exporters. This has arisen due to the conduct of refund verification exercises by RMCD. The initial conduct of the reviews is understandable as the availability of cash refunds potentially creates an incentive for false refund claims to be made and the Director General would want to ensure that claims are legitimate. However, this also needs to be balanced with the need for businesses to conduct their affairs in an efficient manner, and the fact that most major exporters would already be well known to RMCD.
At present there is no consistent process for verification, with different verification requirements posed by different RMCD officials. In some cases, an extensive record of documents need to be provided. There have also been delays in the allocation of a case officer in a number of cases. While we are not to suggesting that refunds do not get paid, (in fact Dato Subro has indicated in the interview above that at least 50% of the refunds have been processed) the time taken to process these refunds is posing significant cash flow concerns for these businesses.
One hopes that after the first review as RMCD become familiar with an exporters' particular business that such claims will be expedited in future. This would allow Customs to focus its attention on unscrupulous traders seeking to profit through false refund claims.
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