The upcoming revision and expansion of Malaysia’s Sales and Service Tax (SST), effective July 1, 2025, is expected to have minimal impact on the residential housing sector. According to RHB Investment Bank Bhd, contractors focused on residential projects, such as MGB Bhd and Kerjaya Prospek Group Bhd, will remain largely unaffected.

The revised SST introduces a 6% services tax on construction services, applicable to contractors with annual revenue exceeding RM1.5 million. However, residential and public housing projects are exempt, along with basic construction materials and certain business-to-business transactions, avoiding double taxation.

Conversely, contractors engaged in commercial, industrial, and infrastructure projects — including firms like Sunway Construction Group, Gamuda Bhd, and IJM Corporation — will be subject to the tax. These contractors may need to factor in the tax when bidding for new projects or renegotiate terms for ongoing contracts.

Despite concerns, the broader construction sector outlook remains positive. The continued exemption for residential projects helps ensure housing affordability remains relatively stable. Moreover, data centre developments — a key growth driver — are expected to proceed, even with the additional tax cost. For example, a 6% services tax on a RM1 billion data centre project would translate to RM60 million, a marginal figure for global tech firms like Google and Microsoft.

RHB maintains its “Overweight” stance on the construction sector, citing resilience in key areas and strategic exemptions that cushion the impact on essential housing and infrastructure. Overall, while the revised SST introduces higher tax exposure in some segments, the residential housing market is expected to remain insulated.