This article first appeared in The Edge Financial Daily on September 5, 2018

KUALA LUMPUR: An industry group yesterday called on the government to expedite the goods and services tax (GST) refunds, saying small and medium enterprises (SMEs) are suffering cash flow problems due to the delay in the payments.

“If the government could even release some of the amount [owed] earlier, that would help us a lot,” said Plastics and Rubber Institute Malaysia president Pong Kai See.

Pong said companies paid GST to the government each month with the expectation that they will also receive the refunds in a timely manner.

“So the cash [is supposed to] get recycled,” he told reporters on the sidelines of the International Rubber Glove Conference and Exhibition 2018.

“But now that is no more. Our cash flow is tightened,” he said, citing an example where an SME recorded outstanding GST refunds totalling RM700,000 in just the five-month period from February to June.

Referring to the local rubber industry, Pong said 70% of rubber glove companies are SMEs. “For the dry rubber segment, virtually all companies are SMEs. These are the ones who are suffering the most,” he said.

The rubber players, Pong said, are working with organisations like the Federation of Malaysian Manufacturers (FMM) and Malaysian Rubber Glove Manufacturers Association to bring the matter to the government.

FMM has previously called for the government to provide a clear action plan on how it will pay the outstanding GST refunds to manufacturers. It has also urged the government not to offset GST refunds owed to companies with the sales and services tax payments they are required to make to the government.

Between 2015 and this year, the government owed 121,429 companies some RM19.4 billion in GST refunds, which Finance Minister Lim Guan Eng said will be paid beginning next year.

Meanwhile, bigger players are also not exempted from being affected by the delay in the GST input tax refunds owed by the government.

Public-listed glovemaker Supermax Corp Bhd said it is owed RM12.92 million by the Customs Department for the period from December last year to June.

This is on top of the RM20.23 million owed by the Inland Revenue Board for a seven-year period between 2010 and 2017, said Supermax president Datuk Seri Stanley Thai.

“So we have RM33 million outstanding from the government on tax refunds… Can you imagine? Smaller players would not be able to [digest], they would just go bankrupt, or they would borrow money from the bank.

“But we understand the [financial] situation faced by the current government. Luckily for us, we are an established company with good cash flow,” Thai told The Edge Financial Daily.

Additionally, Thai shared that the government has just recently allowed the company to offset its future income tax payments with the RM20.23 million income tax refund owed by the government.