Construction sector to benefit from 0% GST

PAM says there will be instant reduction on prices of construction materials

By NUR HAZIQAH A MALEK / Pic By ISMAIL CHE RUS

The construction industry is expected to benefit from zero-rated Goods and Services tax (GST) effective this Friday (tomorrow).

Pertubuhan Arkitek Malaysia (PAM) president Ezumi Harzani Ismail (picture) said there will be instant reduction on prices of construction materials.

“There will be an instant reduction for building construction materials’ prices, however, the implementation may not be very much as the suppliers or manufacturers may readjust the price to gain additional profit,” he told The Malaysian Reserve (TMR).

Ezumi also said that although the construction industry may benefit from the zero-rated GST, architecture firms may not.

“Prior to GST implementation, a company providing professional services is required to collect on behalf of the government a service tax of 6%. The professional services received the benefit of input tax from the system.”

The system allowed them to deduce the input tax they pay in delivering their services.

“If the GST remains 0% rated, the professional service providers will enjoy the tax holiday, but the return of SST (Sales and Services Tax) and government service tax will see them pay 6% service tax without off-setting the input tax,” he said.

TMR previously reported that businesses which have been selling goods inclusive of the consumption tax and absorbing the levy into their prices will see their margins thinning.

The reintroduction of the SST would require further readjustments by manufacturers, especially due to its vague rates, between 5% and 10%.

Meanwhile, some of PAM’s members complained that they have experienced delayed payments for their projects.

“This had happened even before the change of government, which is likely due to the valuation and payment preparation processes. I believe it can be improved to make it more efficient in the future,” he said.

He said there are projects yet to be awarded and are subject to review by the new government. “This is perhaps on a case to case basis as typical building contracts are ongoing.

“The execution of the contract must be in accordance with the contractual agreements, which should be running autonomously and monetary payment issues should not exist,” he said.

Ezumi said the practice of both private and government architects will be maintained until there is an amendment to the Architects Act or regulations in the future.

“We are working closely with the Board of Architects Malaysia in many areas of architectural practice and education.

“Closer relations with the government and regulators are prioritised, as well as participating in preparing the government policies related to the construction industries,” he said.

TMR reported that PAM released its fourth edition of the standard form of building contract last month, where documents were revised to be relevant and applicable in the current economic climate.