JC Fong: Sabah has constitutional right to impose SST on oil, natural gas

Dato Sri JC Fong

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By Lian Cheng

KUCHING, Apr 3: State Legal Counsel Datuk Seri JC Fong says Sabah has the constitutional right to impose State Sales Tax (SST) like Sarawak.

“Sabah has the constitutional right to impose SST like Sarawak has done. They have a provision in their Land Ordinance to regulate petroleum exploration and production,” Fong told DayakDaily.



On whether Sarawak’s initial victory in its case against Petronas on imposition of SST was an impetus driving Sabah to fight for the same right, Fong believed that the decision of Kuching High Court on Mar 13, 2020 may have some impact on Sabah’s decision.

“Sabah has always wanted to follow Sarawak in relation to reclaiming rights over oil and gas.

“The High Court judgement on Mar 13, 2020 must have given them some impetus to impose their own SST.

“Like Sarawak, Sabah has the constitutional power to levy SST on oil and natural gas,” Fong said.

On Mar 13, 2020, Kuching High Court dismissed the judicial review application filed by Petronas. Judge Azhahari Kamal Ramli ruled that the Sarawak government has the power to impose the 5 per cent state sales tax on petroleum products and collect from the national oil company.

Upon considering the submission, he found that the State Legislative of Sarawak may make laws for the imposing of sale tax and any sale tax as under Act 95B(3) of the Federal Constitution, any sale tax imposed by the state law shall be deemed to be among matters emunerated in the State List and not the Federal List.

The power of the state to make law for imposing of sale tax, he said, derived from Article 95B(3), which provides that “each Borneo state shall have power to impose sale tax, that any discriminatory rates would not be imposed on goods of the same type but of different origin”.

While Sarawak was fighting tooth and nail for its right to impose SST, Sabah has been quiet on the matter.

Sabah government, however, has announced on Apr 1, 2020 that it will impose 5 per cent Sales Tax on oil and gas companies operating in Sabah.

Sarawak has imposed its 5 per cent oil and gas since January 2019. Currently, all oil and gas companies operating in Sarawak has paid their dues except Petronas.

Sarawak is expected to generate RM3.9 bil annually from the State Sales tax to support its development agenda. —DayakDaily