Never an iota of doubt Sarawak will prevail in the SST imposition of 5 per cent – JC Fong

JC Fong

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By DD Team

KUCHING, Oct 9: There was never an iota of doubt that Sarawak will prevail in its fight over its right to impose the 5 per cent State Sales Tax (SST) on Petronas, said State Legal Advisor Datuk Seri JC Fong.

He said, the imposition of the SST on all oil and gas companies operating in Sarawak was based on its rights as contained in the State’s Oil Mining Ordinance (OMO) 1958 and as per Malaysia Agreement 1963 (MA63) which is also enshrined in the Federal Constitution.


“The Federal government respected the decision of the High Court which ruled that the State has the Constitutional right to impose the State Sales tax on petroleum products.

“As the matter has reached the Court of Appeal, the Federal government and Petronas reviewed the situation and thought it was best for the matter be resolved without going through the process of appeal because if the Court of Appeal were to rule against Petronas, it would be more difficult for Petronas to resist not only the payment of State Sales Tax but the enforcement of the State’s other laws regulating the production of oil and gas within the boundaries of Sarawak.

“We have never intended to give up any of our rights. (In fact), we are prepared to come to a pragmatic solution with Petronas and Federal government with regards to the payment of the State Sales Tax in the current economic climate in the country caused by the ongoing Covid-19 pandemic,” Fong told DayakDaily in an exclusive interview here yesterday.

On the amount of SST which is currently fixed at 5 per cent, Fong said the decision was made by the State Cabinet.

“I think 5 per cent is a realistic figure, something the oil and gas companies could pay and should not be a hindrance to future investment of oil companies in the state.

“We can increase it if we want to but we must take into consideration the impact of any increase in the investment climate in the oil and gas including in the state because the industry is very dynamic and competitive.

“And as you know, the price of oil and gas worldwide have stumbled and there is already oversupply of these commodities in the world market,” he stressed.

Fong said, the 5 per cent of SST was a realistic amount as it would not burden the oil companies which are currently operating in Sarawak as well as other oil and gas companies which have intention invest here.

“Speaking for myself, the 5 per cent SST is a realistic rate at this point in time. It is also not something which Petronas and other oil companies cannot pay. In fact, the 5 per cent is based on the current rate of production of LNG (liquefied natural gas), crude oil, incandescent and urea at a reasonable price. For oil and gas is already yielding us more than RM3 billion in revenue which is very substantial,” he said.

Fong reiterated that the Sarawak government could reassess the present rate depending on its discretion without jeopardizing the industry.

“Going forward, the government could assess and the government could increase it without in anyway jeopardizing investors’ confidence in the oil and gas industry in Sarawak,” added Fong.-DayakDaily