Petronas to drop appeal, settle tax dispute with Sarawak out of court

The Sarawak government and Petronas will settle their dispute over a RM2bil state sales tax (SST) out of court, with the latter expected to withdraw its appeal at the Court of Appeal.

In a proceeding at the appellate court on Tuesday (June 23), lawyer Datuk Malik Imtiaz Sarwar, representing the national oil and gas giant, informed a three-man bench that Petronas was applying for a postponement based on a letter that was addressed to the court on Monday.

The letter stated that there was a settlement between the two parties.

Sarawak state legal counsel Datuk Seri JC Fong said the state did not object to the postponement as Petronas had given its word to withdraw the appeal.

Court of Appeal judge Justice Kamaludin Md Said, who chaired the bench, fixed Aug 3 for mention in the case.

Also sitting on the bench were Justices P. Ravinthran and Abu Bakar Jais.

Malik, who spoke to reporters later, said the instruction from his client was to prepare the terms of agreement to the settlement where there were internal processes to be met.

“We will withdraw the appeal before Aug 3, ” he said.

On May 8, it was reported that Sarawak and Petronas had issued a joint statement saying that the latter had agreed to pay in full the petroleum products sales tax imposed by Sarawak for the year 2019, which is in excess of RM2bil, or 5% of the products’ sales value.

The joint statement stated that Petronas had retracted its appeal against a decision by the Sarawak High Court to dismiss Petronas’ request for a judicial review to declare the SST imposed by Sarawak as null and void.

In return, Sarawak dropped all claims in its civil case against Petronas for the payment of petroleum products sales tax.

The two parties also reached an agreement on the management of Sarawak’s oil and gas assets, as well as the sales tax on petroleum products.

The parties also agreed that future petroleum products sales tax would be lower and staggered based on future negotiations, under the State Sales Tax (Taxable Goods and Rate of Tax) (Amendment) (No 2) Order, 2018.

On March 13, Kuching High Court Justice Azhahari Kamal Ramli ruled that according to the Federal Constitution, Sabah and Sarawak had the right to impose sales tax on their petroleum products.

Justice Azhahari also rejected Petronas’ application to file a judicial review to declare Sarawak’s sales tax invalid and void.

Sarawak imposed a 5% sales tax on petroleum products on Jan 1 last year under the state’s Sales Tax Ordinance 1998.

The Star