The appointment of an agent under the GST Act does not alter the status of a foreign company as not belonging in Malaysia, allowing for zero-rated GST on services provided to it.

JUDGMENT

Mohd Nazlan Mohd Ghazali JCA:

Introduction

[1] This is an appeal against the judgment of the High Court which dismissed the appellant's judicial review application for a certiorari under O 53 of the Rules of 2012 ("the RC 2012") to quash the respondent's decision in issuing a Bill of Demand for the imposition of tax under the Goods and Services Tax Act 2014 ("the GST Act") in respect of the supply of services by the appellant to its related company which is based outside Malaysia.

[2] This appeal concerned the question whether the supply of services by a local taxpayer to its related foreign company which is registered under the GST Act ought to be construed as a zero-rated supply under the GST Act regime where the former is also registered as the agent of the latter under the Act.

[3] Having heard the appeal - which was conducted by way of a remote communication technology via Zoom, examined the appeal records and considered the submissions by parties, we unanimously decided to set aside the decision of the High Court, and therefore allow the appeal, for the reasons which we set out herein.

Key Background Facts

[4] The appellant is a locally incorporated company and is involved in the business of manufacturing of Dyson products. It also provides research, design and development services. It was also a registered taxable person under s 20 of the (now repealed) GST Act, which came into force on 1 April 2015. The GST Act was repealed by the Goods and Services Tax (Repeal) Act 2018 with effect from 1 September 2018.

[5] The respondent - the Director-General of the Royal Malaysian Customs Department ("the DG of Customs") had duly notified the appellant of its registration under s 21 of the GST Act with the Goods and Services Tax reference number (GST Registration No 000561549312).

[6] The appellant undertakes research, design and development ("R&D") activities and services for the DYSON brand products on a contract basis to its related company - Dyson Operation Pte Ltd ("DOPL") which is a company incorporated and operating in Singapore. This is carried on pursuant to the R&D Services and Supply Agreement ("the R&D Agreement") executed between the two dated 8 November 2012, even before the enactment of the GST Act.

[7] Separately, apart from the R&D services provided by the appellant to DOPL, finished goods manufacturing activities are undertaken by way of contract manufacturing and outsourcing to the contract manufacturer who is also the licensee of the Licensed Manufacturing Warehouse (LMW). The appellant taxpayer therefore manufactures various Dyson products through third party contract manufacturers which then sells the Dyson products to DOPL, which is said to be acting as a principal in its own right. In turn, DOPL, without the involvement of the appellant, resells - this being a direct sale by DOPL arranged from Singapore - these Dyson products to Dyson Exchange Ltd ("DEL") or Dyson Technology Limited ("DTL") based in the United Kingdom, which subsequently sell these products to distributors located both inside and outside Malaysia.

[8] As the total value of the taxable supplies to DEL and DTL exceeded RM500,000.00 every year, DOPL was required to register for GST under ss 12 (in respect of provisions on place of supply) and 20 (liability to be registered) of the GST Act. Since DOPL was considered to be operating outside the country, this in turn triggered the requirement for DOPL to appoint an agent under s 65(6) in order to register for GST purposes.

[9] The appellant was thus appointed as an agent on behalf of the DOPL, and as the agent, the appellant is liable to meet all the responsibilities of DOPL under the GST Act.

[10] In a letter dated 27 June 2018, the respondent notified the appellant that pursuant to an audit performed on the appellant company during the period between 1 April 2015 and 31 December 2017 it was found that the appellant was in breach of s 9 of the GST Act, and stated that 6% GST should have been cha