Residential property to cost more under GST?

Will residential property cost more under GST? To answer this question, we need to take a look at the mechanics of GST for exempt supply.

Under the Malaysian GST Bill, it is proposed that the supply of residential properties be classified as exempt supplies.  Other examples of exempt  supplies are health services, childcare services, selected financial services, and transport services (bus, train, taxi, highway toll).

For purposes of GST, exempt supplies are not subjected to GST.  Consumers need not pay any GST on the purchase price of the residential property.   Although residential property is exempted from GST, the cost of building materials such as cement, steel, bricks, labour work etc, is subjected to GST.

The housing developer will not be able to claim the back the GST tax that they pay for the materials used to construct the residential homes. This will inevitability cause the supplier to increase the selling price of the homes in order to recover the additional cost incurred. 

There is time for the government to reconsider the treatment of residential housing for GST purposes.  In order to avoid a potential increase in the prices of houses, the government should consider classifying residential properties as a zero rated supply.   Zero rated supply is a taxable supply, where the GST rate is fixed at 0%.   A supplier of zero rated goods and services is eligible to claim the input tax credit, and therefore will not have a reason to increase the prices of homes.

 On another note, the government should also come out with clear rulings regarding residential homes built on commercial land.  For example, should GST to be charged on the sale and rental of housing units classified as SOVO or SOHO?

Malaysia GST Bill 2014 passed, finally.

The Malaysian Parliament passed the GST 2014 bill yesterday April 7, 2014 with 119 MPs voted in favour of the law, while 81 MPs were against it.

The contentious GST 2014 was passed after two bloc division votes were taken among the MPs.  The bill was passed for 2nd reading to 3rd reading in 2 days, with no debate held for the 3rd reading.

The Deputy Finance Minister said that the Government had done a survey on 689 consumer items to study the effects of GST on their pricing. 




Out of the 689 items surveyed, the results show that 

• no price changes : 329  (48%)
• cheaper : 287  (42%)
• more expensive : 73 (10%)

In addition, the proposed GST exemption for electricity usage is the first 300KW, up from 200KW previously announced.

The Government also expects a one-off 1.8% increase in inflation rate following the GST implementation but prices were expected to stabilise after that.  The Government will not hesitate to use the Anti-Profiteering Act and put people behind bar for those who unreasonably raise prices of goods.
 
The work has begun. 

If you are a business owner, 

1. assess whether your staff fully understands what they have to do in a GST environment 
2. assess the impact of GST on your cashflow
3. assess whether your accounting software is able to produce GST compliance reports
4. attend GST seminars

If you are a consumer (which is you and me, and everybody )

1. assess the impact of GST on your purchase decision of big-ticket item

Read more here  




 

10 benefits of GST for Malaysians

The Finance Ministry has come out with a list of 10 benefits of GST for the Malaysian business sector and consumers.

The 10 advantages of GST are

1. GST is an effective tax system.  It is a self-assessment tax and there are penalties to ensure compliance.  
2. GST is a transparent tax structure. The tax amount is clearly shown on the sales invoice.  Business and consumers will know exactly how much tax he or she is paying on the goods or services.
3. GST will ensure that everybody pays their fair share of taxes.  You pay tax when you spend.
4. Shadow business will be encouraged to register for GST, in order to claim for input tax credit.
5. With GST, there is a marked reduction in red tape and bureaucracy. 
6. GST will lower the cost of doing business.  The input tax paid is passed on to the next consumer on the supply chain, and is not a cost of doing business, unless you are not registered for GST
7. The lower income group will not be burdened.  The Malaysian government will give out BR1M aid to offset the impact of GST on the CPI (Consumer Price Index)
8. The export sector will become more competitive, as there is no tax on exports
9. For the nation, GST is an additional  form of income, other than income tax and petroleum tax
10. The prices of many items will come down, now that the GST tax is at a lower rate of tax of 6% compared to sales tax of 10%. 

It  is also noted that the GST implementation will have a direct impact on the CPI which would take 6 monhts to stabilise. 

Are you already planning to buy lots of toilet paper and other household necessities at pre-GST prices? .

   
Extracted from a Bernama news report of 10 advantages of GST