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Customs Dept: GST to have minimal impact on home prices

Property News/ 7 October 2014 Leave a comment

The Goods and Services Tax (GST) will only have an impact of between 0.5% and 2% on housing prices, assuming there is no change in supply and demand conditions, according to Customs Department GST director Datuk Subromaniam Tholasy.

Subromaniam said the worry that the GST would result in drastically higher property prices was unfounded.

“Assuming there is no change in market supply and demand, then the net impact is only between 0.5% and 2%. Developers’ margins are around 30% and this increase can be easily absorbed by them,” he told StarBiz in a recent interview.

Subromaniam said for housing, the biggest expense was due to land cost, which does not incur a 6% GST rate.

Currently, input materials have a 5% and 10% tax rate under the Sales and Service Tax (SST), such as floor tiles, pipes, fittings and paint.

“Even paint now has a 10% sales tax. But bear in mind, it’s not 10%. It’s 17% to 18% because of the cascading effect of the SST,” he explained, adding that the cascading effect referred to the hidden costs accrued down the supply chain.

He said once the GST came into effect, there would strictly be a 6% tax rate on such materials, resulting in some savings.

Subromaniam said what would be newly taxed under the GST would be materials such as cement, bricks and steel, as well as construction work by contractors.

He said that foreign labour, interest costs, government fees and staff salaries were zero-rated, meaning a 0% GST rate.

He said architectural, legal and professional services would remain status quo at 6%.

As for the 6% tax on the construction work by the contractors, Subromaniam said it would depend on whether developers outscourced the work.

“If the developer does it, then it does not incur any GST,” he said.

There are three types of tax categories under the GST – standard-rated, zero-rated and exempted.

Consumers only pay the 6% tax for the standard-rated category, while retailers, wholesalers and manufacturers are allowed to claim the GST incurred.

For the zero-rated category, retailers, wholesalers and manufacturers can recover their costs, but the consumer is taxed a 0% rate.

However, retailers are not allowed to claim back the GST incurred under the exempted category, while no GST will be imposed on the consumer.

Source: StarProperty.my

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  1. smith
    smith
    October 7th, 2014 at 15:52 | #1

    When cost increases, price will increase. The quantum of increase will depend on the location’s supply & demand. All this 0.5% – 2% increase as stated by the custom officer is pure bullcrap.

  2. lengmuiwan
    October 9th, 2014 at 22:13 | #2

    smith :
    When cost increases, price will increase. The quantum of increase will depend on the location’s supply & demand. All this 0.5% – 2% increase as stated by the custom officer is pure bullcrap.

    Give u like x 1000000! Some more petrol price never stop raising, petrol raise, everything raise. There is plenty of good reason for developer raise their price as well. This is totally crap!

  3. JJ
    October 14th, 2014 at 16:08 | #3

    Really talking nonsense.

    6% tax for the standard-rated category RM100+6%=RM106 paid by end users

    For the zero-rated category, retailers, wholesalers and manufacturers can recover their costs, but the consumer is taxed a 0% rate. RM100+6%=RM106 paid by end users

    However, retailers are not allowed to claim back the GST incurred under the exempted category, while no GST will be imposed on the consumer. RM100+RM6(price increase by seller since have to pay GST and cannot claim back) = RM106 paid by end users

    Really talking nonsense of about no price increases. Transport 6%, services 6%, handling 6%… all added up is more than 6% already, brainless topic

  4. JJ
    October 14th, 2014 at 16:10 | #4

    **For the zero-rated category, retailers, wholesalers and manufacturers can recover their costs, but the consumer is taxed a 0% rate. RM100 paid by end users

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