theSun Property March 2015

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ON FRIDAY MARCH 13, 2015
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> Insights and important information
WITH the
implementation date
for GST just around
the corner, many are
frantically searching for clarity,
especially those running their
own businesses, entrepreneurs
and investors. The government
recently announced that targeted
consumers will not have to pay
GST on the purchase of RON95
petrol, diesel and LPG.
It also confirmed that the
following items will not be
subject to GST:
(i) all types of fruits whether
local or imported;
(ii) white bread and wholemeal
bread;
(iii) coffee powder, tea dust and
cocoa powder;
(iv) yellowmee, kuey teow, laksa
andmeehoon;
(v) The National Essential
Medicine list covering almost
2,900medicine brands. These
medicines are used to treat 30
types of diseases including
heart failure, diabetes,
hypertension, cancer and
infertility;
(vi) reading materials such as
children’s colouring books,
exercise and reference
books, textbooks,
dictionaries and religious
books; and
(vii) newspapers.
The information above is
retrieved from the NBCGroup
website .
What about property? Agnes
Wong, who delivered a talk on
GST at the recent Property
Outlook Conference 2015 in KL,
urges those withmore burning
questions to refer to gst.customs.
under the Royal
Malaysian Customs Department
(RMCD). Nevertheless, she
shares her knowledge and
expertise on GST and helps clear
the air on some GST-related
issues pertaining to the industry.
PROFESSIONAL INSIGHTS
Wong, a managing partner of
Syarikat Ong Group of
Companies, chartered
accountant and a licensed tax
agent andmore, shares her
thoughts on how this Goods and
Services Tax will affect those of
us who in some way “have some
business” in the property
industry – as house purchasers/
investors/landlords et cetera.
First and foremost, she refers to
GST as a “consumer tax”, it being
borne by the end consumer. She
alsomakes this “negatively
perceived levy” sound positive
and simple. “The higher one’s
spending, the more GST has to
be paid by the consumer, which
is being collected by the customs
department,” she says.
“Personally, I see GST as a fairer
tax … payable when you
consume. So, if you do have the
money to consume, then tax will
be collected by the government
accordingly,” she explains.
InMalaysia, much of one’s
basic needs has been categorised
as “zero-rated items” under GST.
Hence, Wong reminds, if
consumption is planned
properly, GST payments can be
managed. Nevertheless, she
urges consumers to find out what
are the zero-rated, GST-
exempted and GST-levied goods.
A list of these can be
downloaded from www.gst.
Wong also states that
technically, the price of cars should
come down “as GST, which stands
at 6%, will replace the current sales
tax (for motor vehicles), which is
10%”.
“For businesses with proper
GST planning, this tax is really not
categorised as part of a business
cost; except for those items which
are restricted by the GSTAct, such
as items under ‘Block Input Tax’
and those businesses dealing in
exempt supply items where their
GST payable is non claimable,” says
Wong.
IMPACT ON THEWHOLE
With the property developer and
construction company affected, the
price of property is expected to go
up … “between 2.6% and 3%”.
“The inflation of 2.6% is
calculated by REHDA. I got the
information from their recent
presentation at the GST conference
organised by the CTIM (Chartered
Tax Institute of Malaysia),” shares
Wong.
Below, Wong spells out how
various parties will be affected by
the GST.
Contractor
• Currently, contractors may
incur costs on professional
X
services such as engineers,
architects, lawyers, surveyors and
consultants. These are chargeable
under the 6% services tax, as well
as a 10% sales tax on certain
equipment. Currently, those taxes
cannot be claimed back.
•With the implementation of GST,
the sales and services tax will be
replaced with the 6%GSTwhich
is claimable. However,
contractors will need tomanage
their cashflow properly as output
tax needs to be accounted and
paid for, regardless of whether
payment has been received from
the developer/client.
Developer
• Developers of both residential
and non-residential land in a
project are being classified as
“mixed supplier” under GST. Their
main challenge includes the
apportioning of the input tax
incurred. They will need a good
and knowledgeable accounting
team to handle such work.
• IT issues – upgrading software to
be GST-ready is an important part
of getting a developer GST-
prepared. This carries extra costs
to the business.
• Price increase onmajor input
costs from components that are
currently free of Sales & Services
Tax, but will be charged GST
now.
Home investor & purchaser
• GST financeable? As GST is
claimable by registrant, GSTwill
not be financeable. Hence, as a
non-GST registrant investors, you
will be expected to fork out more
money to acquire a non-
residential property. Hence, the
margin of financing will drop as
GST is not financeable. What is
your margin of financing?
• Hike in property price? I think
when it comes to property price,
it will be interesting to see how
each developer deals with his own
GST interpretation, as this will
affect the developer’s pricing
strategy on his products to
his customers.
•Who is your next buyer? If you are
a GST registrant seller, will your
selling price remain competitive if
your buyer is a non-GST
registrant? I think there is no right
or wrong answer to this question.
If you still want to transact a deal
with a non-registrant, will the non-
X
X
registrant buyer negotiate that the
price sold is GST inclusive or GST
exclusive?We can onlywait and
see how themarket drives itself in
the GST era.
• RPGT vs income tax? This is an
upcoming topic to look at by
investors and purchasers.
COME APRIL 1, 2015
For those who have purchased
properties and are waiting for
delivery (if they do not receive
their properties by April 1, 2015),
Wong advises to check with the
developer as to who will take up the
GST cost. She highly recommends
one to query their developers now
due to the many different scenarios
and impacts as spelled out below.
i. If the property is under an
agreement with progressive
payments and the key or vacant
possession will only be handed
over after April 1, 2015:
a) The progressive payment that
is made after April 1, 2015 will be
subject to GST;
b) If the agreement states that the
last payment should be made
after April 1, 2015, even though
one has made the full payment
before April 1, 2015, the last
payment will still be subject to
GST because according to the
agreement, the full payment
should be made before April 1,
2015.
ii. If the property is under an
agreement with no progressive
payment and the key or vacant
possession will only be handed
over after April 1, 2015:
a) The invoice or payment which
was issued or received before
April 1, 2015 is deemed GST
chargeable, as if it took place on
April 1, 2015.
Wong’s advice: “Basically,
whenever you transact a property,
whether you are a registrant or
non-registrant, your knowledge in
understanding your GST impact is
important whenmaking your
decision to buy or sell. So, arm
yourself with knowledge, sign up
for some of the many courses and
programmes to familiarise yourself
about GST.”
Follow our column in the next
fewweeks to learn further how
GSTwill impact the property and
secondary house market.
PROPERTY PRICES
ADVERSELY IMPACTED
• 2014 Budget
Residential – Exempt
Non-residential – Standard.
• Escalating house prices poses
a major challenge for house
buyers.
• Higher prices of goods and
services will be incorporated
into the sale price of
residential properties.
• Prices of residential
properties will be affected
by the implementation of
GST especially the affordable
housing category – home
ownership by target groups
will be a bigger challenge.
• Based on consultation with
industry experts andmember
developers, REHDA’s
calculation shows that GST
imposition will result in an
increase of house prices by
about 2.6%.
• Currently, some input
materials are levied with
Sales and Service Tax at 5%
and 10%. However, these are
not major buildingmaterials/
construction components
incurred by developers.
• In actual fact, major
components of construction
namely cement and concrete,
steel, bricks, sand, etc
currently do not attract Sales
and Service Tax.
• Therefore, implementation of
GST will inevitably contribute
to the increase of property
prices.
[Information fromREHDA presentation]
DIDYOUKNOW?
• The current sales tax and
service taxwill be abolished
andbe replacedby a
consumption tax basedon the
value-added concept known
asGoods and Services Tax
(GST).
• Suppliesmade by the federal
and state government
departments are not within
the scope of GST except for
some services prescribedby
the financeminister. Supplies
made by local authorities and
statutory bodies in relation to
regulatory and enforcement
functions are not within the
scope of GST.
•GST chargedon all business
inputs such as capital assets
and rawmaterials is known
as input taxwhilst GST
chargedon all suppliesmade
(sales) is known as output
tax. For eligible businesses,
the input tax incurred is
fully recoverable fromthe
government through the
input tax creditmechanism.
• The standardGST rate is 6%.
The threshold for purposes
of registration under GST
is the annual sales value of
RM500,000. Businesses below
the threshold are not required
to register butmay do so on a
voluntary basis.
[Information retrieved fromNBCGroup]
Exempt supply means goods
and services sold by businesses
that are exempted fromGST.
For such businesses, GST
paid on their inputs cannot be
claimed as credits. Examples of
goods and services exempted
fromGST are as follows:
1. Land used for residential
or agricultural purposes or
general use;
2. Building used for residential
purposes;
3. Financial services;
4. Private education services;
5. Childcare services;
6. Private healthcare services;
7. Transport services;
8. Tolled highways or bridges;
9. Funeral, burial and cremation
services; and
10. Supplies made by societies
and similar organisations.
[Information retrieved from
NBCGroup]
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