Monday, 22 July 2013

Customs-Private Sector Consultative Panel (CPSCP) Meeting No.1-2013

Representatives from the Institute’s Technical Committee-Indirect Tax (TC-IT) attended the Customs-Private Sector Consultative Panel (CPSCP) Meeting No.1-2013 held recently. We are pleased to update members on some of the issues discussed during the meeting:-

1)    The Practice of Standard Procedures by Customs Officers

The meeting was informed that the practice of standard procedures of the Royal Malaysia Customs (RMC) varies from one customs station to another and sometimes among officers of the same Customs station. It was suggested the all procedures and compliance requirements be made transparent to the public and a special officer be assigned to attend to public enquiries on issues relating to the standard practice and procedures.

The RMC clarified that directions to all Customs officers have been issued through Customs Rulings, Administrative Circulars and Client Charter to ensure uniformity of implementation.

The Meeting decided that all compliance requirements and the format of form to be used in dealings with the RMC should be uniform in all Customs stations in the country and will be uploaded onto the RMC website. Standard Operating Procedure will be prepared for all Customs officers. The RMC will inform the coming Customs Directors Meeting No.72 of the issue and decision.

2)    Sales Tax and Service Tax Audit Framework

With the impending Goods and Services Tax (GST), the Customs has been stepping up the sales tax and service tax audits. The audit will generally cover a period of 3 years from the date of the audit and the licencees are normally given 14 days to submit their records and books of account.

CTIM has proposed that, to ease the audit process and avoid misunderstanding, an audit framework for sales tax and service tax audit should be drawn up by Customs with input from the practitioners and it should be made available to the public. Sales tax and service tax licencees need to know the areas that will be covered during the audits and how to prepare documentation and information that will be relevant to the audits.

The Customs has responded that, unlike for income tax where audit is separated from investigation, a sales tax and service tax audit is a hybrid of audit and investigation. There may be a situation when Customs may turn an audit into investigation without prior notice. Customs will prepare an Audit Framework for licencees’ reference and upload it to the Customs’ website in due course.

3)    Vendor applying for refund under Section 31 of Sales Tax Act, 1972

Generally, when a vendor purchases locally manufactured goods from a licensed manufacturer, he would have paid the sales tax. If he subsequently sells the goods to a licensed manufacturer who has the approval of the Director General through CJ5 to purchase the goods for manufacturing purpose, he may apply for a refund of the sales tax by submitting the relevant documents such as JKED2, licensed manufacturer CJ5, to prove that sales tax had previously been paid etc.

In practice, for reasons of confidentiality, the vendor is unable to produce the sales tax bimonthly return (CJP1) to prove that sales tax had previously been paid, as this document belongs to the licensed manufacturer who paid the sales tax.

CTIM has proposed that since the vendor has no authority over the bimonthly return (CJP1), it would be more appropriate for the Customs to verify the claims with the licensed manufacturer. It is suggested that perhaps the vendor needs to provide the customs with a copy of the invoice for further action by the Customs.

Customs is in agreement with CTIM’s view and informed that this might be an additional requirement requested by the state offices but not as instructed by the Customs’ head office. The vendor may write to the respective state Customs’ Director on the matter.

4)    Application for CJ5 under Sales Tax

Presently a Sales Tax-licensed manufacturer is required to apply for CJ5 on a yearly basis or upon the expiry of the amount approved. It was proposed that a “one-time approval” be granted in respect of CJ5 at the time of issuance of the Sales Tax licence as the manufacturer is required to submit the list of raw materials upon application for the licence.

The Customs has responded that the existing procedure of granting approval for a period of 1 year only, will continue to be practised. The proposal for the “one-time approval” may not be implemented for the time being due to the impending GST implementation.

5)    One Stop Centre for All Customs’ Declarations in Port Klang

Currently there are separate Customs Stations at Northport, Westport, South Point and Free Zone, posing a constraint on deployment of Customs personnel. In addition, there are different standards for Bank Guarantees at Northport and Westport. It is proposed that all Customs’ declaration (K1, K2, K3 and K8) be made at one single location (One Stop Centre) in Port Klang.

The Meeting agreed with the proposal and will discuss with the Selangor Customs Director on the relevant Standard Operating Procedure.

For more information, members may view the Minutes of CPSCP Meeting No.1/2013 at our website.

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