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Thursday, May 8, 2014

GST may pose cash-flow woes for palm oil refiners

Publication: NST
Date of publication: Apr 26, 2014
Section heading: Business Times
Page number: 005
Byline / Author: By Ooi Tee Ching

PETALING JAYA:CASH-STARVED palm oil refiners, especially small cooking oil repackers, may face cash-flow problems if the Customs Department's payment of claims under the goods and services tax (GST) is not carried out in a timely manner.

"Millers will charge us a six per cent GST upfront on purchases of crude palm oil (CPO).

"As refiners, we're not allowed to pass on this cost to our clients as exports of palm oil are zero-rated under GST. This means, we are expected to make our monthly tax claims to the Customs and we're promised of refund within two weeks," said Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohamad Jaaffar Ahmad, here, yesterday.

He gave an example of a typical refinery buying 20,000 tonnes of CPO from the miller in a month.

At the current price of RM2,500 per tonne, the purchase works out to be RM50 million monthly.

So, the six per cent GST on RM50 million worth of CPO is RM3 million.

"That's RM3 million a month stuck in the system for every refiner.

Compared to oil palm planters who make reasonably good profits, the refinery business is very much a play of margins.

"Sometimes, when CPO prices jump, we've no choice but to tolerate negative margins," he said.

"Come April 2015, if the Customs collection and refund system is not robust enough to execute timely payments, the financially weaker refiners among us will definitely face cash-flow problems.

"Time is money and refiners operate on tight margins," Mohamad Jaaffar said.

It was reported that Customs director-general Datuk Seri Khazali Ahmad said his agency would be using a new software to facilitate the GST implementation.

Known as MyGST, it was developed at a cost of about RM100 million.

"The MyGST system will be integrated with the National Registration Department and the Companies Commission of Malaysia.

Later, it will also be linked to all the banks in the country," he said.

Last month, Deputy Finance Minister Ahmad Maslan announced the government had allocated RM150 million in subsidy for small and medium enterprises to purchase GST-compliant accounting software.

He also said the GST will allow the government to reduce its reliance on income tax and petroleum earnings.

It was reported that the Customs is expected to reap RM22 billion per year when GST is implemented, about 40 per cent more than the RM16 billion collected from the sales and services taxes currently.

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