KUALA LUMPUR — The appeal for a reconsideration of the Goods and Services Tax (GST) Act on stratified properties managed to get a toehold in via a reply received from the Tax Division Secretary of the Ministry of Finance (MOF). In the letter, the Ministry said it will be extending the GST-exempt supply to include all residential stratified properties, thereby exempting all maintenance and management fees including sinking fund charged by the Management Corporation (MC) and Joint Management Body (JMB) from the six per cent GST.
However, maintenance fee is likely to increase because the GST charged on services provided to high-rise residential buildings is not claimable.
The MOF reply was in response to a petition dated Nov 28, 2014 jointly sent by the National House Buyers Association (HBA), Association of Valuers, Property Managers, Estate Agents and Property Consultants in the private sector of Malaysia (PEPS), and the Royal Institution of Surveyors Malaysia (RISM).
The petition representing six million parcel owners and occupiers of approximately 15,000 stratified development areas in West Malaysia, appealed to the government to amend the GST Act 2014 to apply GST zero-rated tax supply for the maintenance charges, sinking fund and all forms of related contributions or charges payable by parcel owners.
The petition also claimed that GST imposed on JMB or MC is unfair as they are not business entities with any pecuniary profit.
According to the GST Act 2014, GST is charged on taxable supply of goods and services, made by a taxable person, in the course of furtherance of business in Malaysia.
In the reply by the MOF, it states that supplies made by JMB and MC are deemed as conducting a form of business, which means that the bodies are involved in business although the supplies made are meant only for the residential parcel owners of stratified properties. So the appeal for GST zero-rated tax supply cannot be considered for the services made by JMB and MC.
The letter also states that GST charges on building or parcel for the purpose other than residential will be imposed.
Hence, although the GST-exempt supply will be extended to all residential strata properties, owners will be affected by higher maintenance cost as GST will still be charged by their service providers. Previously, the GST-exempt supply was only applicable to low- and medium-cost developments.
PEPS said that they are happy with the improvement from their endeavour but disappointed with the ministry’s decision. According to PEPS, although changes were made, the position on the low-cost and low-medium cost remains status-quo, and this will burden the low-income group especially retirees who have no income.
According to HBA honorary secretary Chang Kim Loong, the association hopes to have a meeting with the MOF soon to highlight the issues.