Construction services and building materials exempted from SST

Finance Minister Lim Guan Eng announced on 12 August 2018 that construction materials and services will be exempted from the Sales and Service Tax (SST).

Under the previous Goods and Services Tax (GST) regime, bricks, cement, sand and other construction materials were subjected to 6 per cent GST. The same applied to construction services.

“This had led to increased construction costs under the GST era, including the increase in house prices,” said Lim, according to a news report by The Star.

With building materials such as cement, sand and iron exempted from SST, Lim hopes that construction costs will reduce, easing the pressure on house prices, industrial and commercial buildings.

The reintroduced SST will kick in on 1 September to replace the GST.

However, the sales tax exemption alone may not guarantee more affordable property, according to the Malaysian Institute of Architects (PAM) in a Malay Mail report.

PAM president Ezumi Harzani Ismail said raw materials only account for less than a third of the total development cost, as such the impact on house prices may not be significant.

“The rest of the (development) cost would consist of the cost to purchase the land and other compliance charges that come with the building the houses or units,” he says. Profiteering would also prevent prices from falling.

Housing and Local Government (KPKT) Deputy Minister Datuk Raja Kamarul Bahrin Shah said it requires the participation and support from all stakeholders to bring down the housing cost.

“The local state government and the private sector are very much important in handling various issues and challenges and to create a housing industry which is competitive and sustainable,” he said. “The state government, which controls the land premiums, development charges and the authorities responsible for approval, will have to play a part to work with architects and developers.” — Construction+ Online