Building materials and services exempted from SST

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KUALA LUMPUR ― Property prices are not expected to rise when the Sales and Services Tax (SST) is fully implemented as the government has exempted construction materials and services from the tax.

Announcing the exemption yesterday, Finance Minister Lim Guan Eng said the move should bring down the prices of residential, commercial and industrial buildings.

“The government hopes that construction cost will be reduced with the exemption of SST. Some of the building materials that will not be subjected to SST are cement, sand and iron,” he said.

Lim said the six per cent Goods and Services Tax (GST) imposed on basic building materials, such as bricks, cement and sand, by the previous government had inflated the cost of construction and the price of houses and buildings.

He declared the GST “dead” on Wednesday after Parliament passed a Bill to repeal the consumption tax. The government had zero-rated the GST in June before its passage in the Dewan Rakyat.

The SST, which is separated into a sales tax of 10 per cent and a six per cent service tax, is expected to start on Sept 1.

Malaysian International Chamber of Commerce and Industry Perak chairman Datuk Lim Si Boon said businesses would be gladdened by the tax cut.

“The abolition of the GST and the SST exemptions for construction services and building materials will be welcomed by those involved in construction, building materials and property development,” he told Malay Mail.

Si Boon said he expected en-consumers to reap benefits in terms of savings but noted that this would depend on other factors.

“We expect some savings to be passed on but the exact quantum depends on many factors such as market perception, elasticity of demand, economic outlook and margins,” he said.

However, Real Estate and Housing Developers’ Association Johor chairman Datuk Steve Chong said the SST exemption will not have a significant impact on house prices.

“We believe the savings are too small to be passed on to home buyers, which will not in anyway translate to a significantly lower price for homes,” he said.

“We have to remember that during the introduction of the GST, those who were taxed were entitled to a refund.”

Chong said the government should look into the construction industry in totality as the sector is among many that have a direct impact on the economy.

“If the government is sincere in lowering the price of homes from taxes, then a review of construction compliance costs would be more feasible,” he said.