Goods and Services Tax Act 2014 : Offences and Penalties  

October, 2016 - Christopher Tay Hanmin

IN THIS ARTICLE, CHRISTOPHER TAY HANMIN BRIEFLY REVIEWS SOME OF THE OFFENCES UNDER THEGOODS AND SERVICES TAX ACT 2014("GST ACT").

Introduction

One of the most significant tax Acts to be introduced in the past 30 years is the GST Act which was gazetted on 19 June 2014 and has set 1 April 2015 as the effective date for the imposition of the Goods and Services Tax ("GST"). UnderSection 5of the GST Act, the Director General of the Customs and Excise ("Director General") and, by extension, the Royal Malaysian Customs Department ("RMC") will be responsible for the implementation and administration of the GST Act. Some of the more significant offences in the GST Act are discussed below.

Incorrect return

Section 88 of the GST Act provides that:

"Any person who

(a) makes an incorrect return by omitting from the return any information;

(b) understates any output tax or overstates any input tax in a return; or

(c) gives any incorrect information in relation to any matter affecting his own liability to tax or the liability to tax of any other person, commits an offence…"

Upon conviction, that person would be liable to a fine not exceeding RM50,000.00 and/or to imprisonment for a term not exceeding three years and to a penalty equal of the amount of tax which has been or would have been undercharged if the return or information had been accepted as correct.

The liability for a penalty for this offence is a new provision as there was no provision for a penalty to be imposed for this offence in one of the predecessors to the GST Act — the Services Tax Act 1972.

Section 88 - a strict liability offence?

The manner in which Section 88 of the GST Act has been phrased and constructed could potentially be construed as a strict liability offence.

A strict liability offence is an offence where as long as the prosecution is able to prove that actus reus (guilty act/physical element) has been committed it would be sufficient for the conviction of that accused person regardless of that accused person’s mens rea (guilty mind/mental element).

No defence under section 88

Section 88 of the GST Act does not expressly provide for a defence. In comparison, Section 113(1) of the Income Tax Act 1967 ("ITA") employs the phrase "…hall, unless he satisfies the court that the incorrect return or incorrect information was made or given in good faith, be guilty of an offence…" which expressly provides for the defence of good faith in cases where a person has made an incorrect return or provided incorrect information.

In the absence of a defence in Section 88 of the GST Act, general common law defences in Section 88 of the GST Act, general common law defences would have to be referred to.

Tax agents, officers, etc

Separately, individuals who assist in or advise with respect to the preparation of any return may be guilty of an offence under Section 89(2) of the GST Act if the return results in an understatement of liability for tax of another person.

Upon conviction, the penalty is a fine between RM2,000.00 and RM20,000.00 and/or imprisonment for a term not exceeding three years. However, these individuals can rely on the defence provided under the same section where they must prove that any such assistance or advice was given with reasonable care.

Fraud and evasion of tax

The offence and penalty for the evasion of tax underSection 89of the GST Act require an element of intention to evade tax or assist another in evading tax. Section 89(6) of the GST Act goes on to deem any evasion of tax as being done with the knowledge of the accused person unless the accused person can prove the contrary.

The evasion of tax and fraud are serious offences and the financial penalty for the offenders reflects the gravity of these offences. Upon conviction, an offender will be liable to a fine of between 10 and 20 times the amount of tax involved and/or imprisonment for a term not exceeding five years.

If the offender commits a second or subsequent evasion offence, the financial penalty would be between 20 and 40 times the amount of tax involved and/or imprisonment for a term not exceeding seven years. If the amount of tax involved cannot be ascertained, an offender would be liable to a fine between RM50,000.00 and RM500,000.00 and/or imprisonment for a term not exceeding seven years.

Offences by bodies of persons, etc

Section 97(1)of the GST Act imposes a presumption of guilt on any person who, at the time of the commission of the offence, was a director, compliance officer, partner, manager, secretary or other similar officer, and includes persons purporting to act in the capacity or was in any manner or to any extent responsible for the management of any of the affairs or was assisting in the management of the company, limited liability partnership, firm, society, association or other body of persons.

This presumption can be rebutted if that person proves:

  1. that the offence was committed without his knowledge, consent or connivance, and
  2. that he took all reasonable precautions and had exercised due diligence to prevent the commission of the offence.

Persons who are associated or involved in the management of the bodies of person as described above should be aware of this offence.

Other provisions

Section 93(1)of the GST Act makes it an offence to refuse to give information reasonably required by an officer of GST or to give false information to an officer of GST. Pursuant to Section 93(2) of the GST Act, it is no defence to allege that the untrue or incorrect information was furnished inadvertently or without criminal or fraudulent intent, or was misinterpreted by the interpreter.

UnderSection 92of the GST Act, a person who assaults, hinders, obstructs or fails to give reasonable facilities or assistance to the officer of GST in the performance of that officer’s duties under the GST Act commits an offence.

Conclusion

All taxable persons under the GST Act, including directors and managers as well as tax agents, should take note of the offences under the GST Act and exercise due care to avoid being penalised for falling foul of any of the offences in the GST Act.

 

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