The Goods and Services Tax (GST) was introduced in Malaysia back in April 2015. Prior to its inception, spending spiked before decreasing drastically after its implementation. This decline is expected to continue as consumers and businesses alike adjust to the new taxation.
The list below contains information regarding GST and how it might affect the property sector:
- GST is a consumption-based taxation system which works as a replacement for the existing Sales and Service Tax (SST).
- The introduction of GST in Malaysia is not a new idea; the first announcement of a possible implementation was made by the government a decade ago back in September 2004, but was postponed twice before its implementation.
- GST will be charged on all types of supply of goods and services in Malaysia (except for goods prescribed as zero-rated and exempt-rated).
- The Real Estate and Housing Developers’ Association (REHDA) has forecasted that residential property prices may rise by 3-3.5% after GST.
- The Royal Malaysian Customs (RMC) has also forecasted that housing prices may increase by 0.5% to 2%.
- A purchaser of residential property will not be subject to GST since the supply of residential property falls under the category of exempt-rated supply.
- Even though residential property developers are not allowed to claim any input GST incurred on their business purchases, the cost of their own purchases will increase. Due to this, the developer may adjust its selling price to reflect the extra costs due to the unrecovered input GST.
- As for commercial and industrial properties, the cost is expected to increase as those sectors will be subjected to GST.