Not getting back your GST refund?

Are you managing the process correctly?

August 2017

By Emily Lee Hoai Min

As the saying goes “cash is king”. Poor cash management could lead to business failure.

One area which could negatively impact on cash flow is a delayed Goods and Services Tax ("GST") refund. Therefore, companies should make an effort to follow up with the Royal Malaysian Customs Department (“Customs”) on the refund request to ensure that there is no delay on the expected cash inflow.

If the refund amounts are significant, any delay may cause inconvenience and disruption to business operations. Additional cost of borrowings may also be incurred by companies as they need to seek an alternate source of finance while waiting for the delayed GST refund.

According to the GST law, a GST refund should be made to the taxpayer within 14 days (for online submission) or 28 days (for manual submission) from the day Customs received the submitted return.

However, the legislation allows this to be extended to “the time practicable”. Often this happens when Customs carries out an investigation or audit to validate the GST return filed before releasing the GST refund to the taxpayer. The investigation usually involves a request for further information and supporting documents, typically communicated via the Taxpayer Access Point (“TAP”) or via a letter, an email or a phone call.  For further information, read GST information requests from Customs.

So what can you do to manage your GST refund?

1. Frequently login to your account in TAP to check if Customs has sent any communication in respect of the refund.
2. Directly follow up with the Customs officer to check on the refund status¹.
3. Visit your Customs office in person to follow up.

Many of the above often occur in companies which do not have a designated tax team or structure to manage tax matters or communication from authorities. We have seen cases where the information requested was not provided to Customs on time due to the Customs’ request going un-noticed or unanswered. Some businesses may not be able to provide information within the required time frame. Customs is generally amenable to requests for extension of time, but failure to request and agree such an extension could result in the GST refund being rejected. The key is to ensure the refund process is managed proactively.

So what can you do if your GST refund has been rejected?

As a remedy, an application can be made to the Director General of Customs to review the decision. The application must be made by the taxpayer within 30 days from the date he is notified of the decision made by Customs. It is very important for the taxpayer to provide a valid reason and/or basis to support why the GST refund should be made. This will be taken into account when the Director General reviews the GST refund request.

In the event that the Director General is not satisfied with the reasoning and/or basis provided by the taxpayer and rejects the application for review, the taxpayer may further pursue the matter to the GST Tribunal. This must also be done within 30 days from the date the taxpayer is notified of the decision made by the Director General, unless an extension of time is obtained separately from the Tribunal.

Conclusion

Delayed refunds will result in a negative impact to cash flow and, as a result, an increase in cost to a business. Therefore, companies should take the initiative to follow up with Customs on their GST refunds and to closely monitor information requests and timelines from Customs.

Moreover, a cost-benefit analysis should also be undertaken before deciding to appeal to the Director General and GST Tribunal for a review of a rejection. The company must take into account whether there is any basis to support the GST refund, taking into consideration any reasons for the rejection which may have been communicated by Customs.

We have extensive experience in following up on GST refunds on behalf of our clients. Should you wish to learn more about the process, or if you would like our assistance to follow up on your refund, please do give us a call.

¹Note: This may be easier if you know the name of the Customs officer in charge of your file. If you have received requests for information or other communication from Customs in respect of your refund, the name of the officer should be included in the medium of communication.

Emily Lee Hoai Min is a Consultant of the Indirect Tax Advisory Group at PwC Malaysia.