November 2018 :- Following the abolishment of the Goods and Services Tax (GST), the Sales and Service Tax (SST) kicked off on Sept 1 promptly, but without a complete list of chargeable items, surprising many business operators and consumers. Property buyers should be relieved though, as property, including land, is not chargeable under SST.
Under the SST regime, property buyers should expect a greater tax burden for the use of professional services rendered by solicitors, architects and engineers.
The GST regime carried a fixed tax rate of 6% across every stage of the supply chain. On the other hand, the SST (6% Service Tax and Sales Tax 5% and 10%) is a single-stage tax which is imposed only at production level. So, there is no overlapping of tax chargeable as the output tax will be offset against the input tax at every stage.
From a mathematical perspective, the amount of tax payable during the GST regime is generally perceived as being more burdensome on consumers.
The effect of SST on property buying
There are still some details that need to be clarified, as the Service Tax is chargeable on the services provided based on the value of the services performed, including all charges during the transaction process, which was previously chargeable under GST and the SST before it.
These chargeable items include miscellaneous expenses, cost of extra work, commissions, travel or accommodation expenses, and reimbursement charges for normal copying and stationery. Prescribed services such as legal services are subjected to 6% tax. However, consultants and industry players reckon that they will not impact construction cost and cost of owning a property, compared with under the GST regime as the chargeable rate then was also 6%.
Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) head of taxation committee Koong Lin Loong notes that because properties are not subject to SST, many may think that the cost of owning a property will be reduced. But he explains that the cost of purchasing a property may not change as there are other services involved in the construction and in the transaction of a property that are not SST exempted.
The Finance Ministry has also announced a list of goods taxable under SST at end-August at a sales tax rate of 5% and 10% with a total of 5,443 consumer items exempted from the tax.