Tax consultants: Zero-rated GST could spur market sentiment

PETALING JAYA (May 17): Taxation consultants lauded the government’s move of zero-rated GST as it will improve the ease of doing business in Malaysia and lessen the hassle for developers, especially those who have mixed-use developments.

The Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) head of taxation committee Koong Ling Long said the computation and book-keeping for different categories of GST is complicated and require a lot of technical support, which will eventually increase the cost of business.

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“For a developer who has mixed developments, this could be even harder as commercial and residential properties are in different categories,” he told EdgeProp.my.

Koong is also a member of GST Monitoring Committee of the Ministry of Finance and GST Technical Committee of the Royal Malaysian Customs.

For commercial properties which are under the standard rated 6% GST category, developers are allowed to claim the input tax (for the raw material purchased for the construction) from the government as the final GST will be paid by commercial property buyers.

However, for the residential properties which fall under the exempt-rated GST category, property buyers will not be charged the 6% GST in the transaction, but at the same time, the developers are not allowed to claim the input tax as residential properties are exempt rated.

In this situation, the developers could either choose to absorb the additional GST cost or partially pass it to property buyers, which in turn pushes up the selling price, depending on the developers’ pricing strategy.

Koong noted that with the announcement of zero-rated GST, developers are free from GST, so the price of residential properties should be reduced, rightfully, until the new Sales and Service Tax (SST) mechanism is introduced.

“The announcement is timely as the longer it [uncertainties] takes, the longer the market will take to regain its momentum. The decision to zerorise GST not only brings down business cost but also improve the ease of doing business in Malaysia,” he added.

Meanwhile, tax consultancy firm YYC Holdings Sdn Bhd CEO Datin Yap Shin Siang opined that with the announcement of zero-rated GST, property buyers who intend to purchase commercial properties will now speed up their decision-making process.

“The 6% GST could be quite costly for commercial properties which are selling above RM 1 million. After the zero-rate GST, property buyers might relook at this segment, which is a good thing for the property sector,” she added.

However, she noted that for business owners, zero-rated GST or the re-introduction of SST in the future might cause a short-term hiccup for them as they will need to adjust and rework their accounting system.