Post-GST: The real impact on buyers · GST is levied on the supply of goods and services at each...

Post-GST: The real impact on buyers25th April 2014

Agenda

Market Trends and Observations

Implications of GST for the Property Industry

Moving Forward

The proposal and recommendations contained herewith remain the sole property of Sunway Group. Any unauthorized duplication or content use without consent of authority from Sunway Group, is deemed as breach of copyright.1

Definition of GST

GST is a multi-stage consumption tax on goods and services. GST is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution.

GST is a broad based consumption tax covering all sectors of the economy, i.e. all goods and services made in Malaysia including imports, except for specific goods and services which are categorized under zero-rated supply and exempt supply orders as determined by the Minister of Finance and published in the Gazette.


Source: http://gst.customs.gov.my/

Rationale for GST

Broadens tax base and reduces Government’s exposure to cyclical fluctuations under direct taxation.

GST expected to generate RM23.2Bn* with net excess of RM5.6Bn before expenditure on assistance programmes.

GST will help the government to meet budget deficit target of 3.2% of GDP in 2015.

Putting additional tax revenue into development budget key to future economic growth to be seen under 11MP.

GST to improve competitiveness of exports.


* Note: On a registration target of 300,000; vs. 372,040 as of 20 April 2015. http://gst.astroawani.com/en/what-is-gst

Timing of Implementation


Oct 2013GST Announced

April 2015GST Implemented

GDP Growth Forecast for the following year

5.0-5.5% 4.5-5.5%

Current Account to GDP 7.6%(2013)

4.7%(2014)

Govt. Budget Deficit to GDP 4% 3.2% (revised target)

Inflation 2 -3% 2.5 – 3.5%

OPR 3.00% 3.25%

USD:MYR 3.15 3.71

Crude Oil Price per barrel US$100 US$52

1: World Bank, Global Economic Prospects

Property Market Trends


+8.1% -31.6% +30.6%

-0.8%-3.5%

-5.6%

+19.1%

+27.6%+15.2%

+5.6%+16.3%

+11.4%

+35.9% -68.3%-10.6%

-6.6%

-6.3%

-4.1%

+22.7%

+86.5%

+9.9%

+7.9%

+16.0%

+11.2%

-80.2% +200% +26.7%

-7.6%-12.3%

+1.3%

+8.3%

+52.2% -14.5%

+16.5%

+29.7%+13.4%

+40.6% -69.8%-33.3%

-9.5%

-21.7%

+19.6%+8.3% +29.6%

-10.8%

+15.5%

+29.3% +21.3%

Property Market Trends


0%

10%

20%

30%

40%

50%

60%

70%

80%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loan

Ap

pro

val R

ate

RM

Mill

ion

Loans - Residential Properties (Jan & Feb)

Sum of Loans Applied (Residential) Sum of Loans Approved (Residential)

0%

10%

20%

30%

40%

50%

60%

70%

0

50,000

100,000

150,000

200,000

250,000

300,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Loan

Ap

pro

val R

ate

RM

Mill

ion

Loans - Residential Properties (FY)

Sum of Loans Applied (Residential) Sum of Loans Approved (Residential)

0%

10%

20%

30%

40%

50%

60%

70%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Loan

Ap

pro

val R

ate

RM

Mill

ion

Loans - Non-Residential Properties (FY)

Sum of Loans Applied (Non-Residential) Sum of Loans Approved (Non-Residential)

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loan

Ap

pro

val R

ate

RM

Mill

ion

Loans - Non-Residential Properties (Jan-Feb)

Sum of Loans Applied (Non-Residential) Sum of Loans Approved (Non-Residential)

Source: Bank Negara Malaysia, Monthly Statistical Bulletin March 2015

GST Implementation on Property


Development of ProjectsAll materials (e.g. building materials, goods) and services (e.g. architect and engineers fees) used

will now incur GST 6% (Input tax)

Additional cost of developing properties for sale/ lease

Residential Properties(Exempt Supply)

• Developer cannot charge GST to buyer

• Input tax is not claimable

Commercial Properties(Standard Rated Supply)

• Developer charge GST to buyer

• Input tax is claimable

Types of GST


Types of GST

Standard Rated Supplies

taxable supplies of goods and services which are

subject to the standard rate of 6%.

Zero-rated supplies

taxable supplies which are subject to a zero rate, that is not liable to GST at the

output or input stage.

Exempt supplies

non taxable supplies which are not subject to GST at the output stage that is,

when supplied to the consumer. GST paid on input by the businesses

cannot be claimed as tax credit.

Commercial Properties

Residential Properties

Residential Property Purchase


Residential Property

No 6% GSTScenario 2:

A GST Registered Person/Company buys

from Developer

Scenario 1:A Non GST Registered Person/Company buys

from Developer

No 6% GST

Property completed and handed over to

the owner

Service charge and sinking fund No GST

Maintenance cost of the property with GST Cleaner, Security Guard, Landscaping Utilities bill e.g. Electricity (charge when exceeded 300kW) Property Management Service Fee (for strata title properties)

From Developer

to End Consumers

GST6% on

maintenance

However, GST on 3rd party’s

service i.e. Legal Fees

Sell/RentNo 6% GST

to next buyer/ tenant

Sell/RentNo 6% GST


Commercial Property Purchase


Commercial Property

With 6% GST

Property completed and handed over to

the owner

GST on 3rd

party’s service, i.e. Legal Fees

No 6% GST

Sell/ RentNo 6% GST


With 6% GSTFrom

Developer to End

Consumers

Service charge and sinking fund with GSTMaintenance cost of the property with GST Cleaner, Security Guard, Landscaping Utilities bill e.g. Electricity (charge when exceeded 300kW) Property Management Service Fee (for strata title properties)

Sell/RentWith 6% GST


Scenario 2:A GST Registered

Person/Company buys from Developer

Scenario 1:A Non GST Registered Person/Company buys

from Developer

Summary – The Impact to Buyers

RESIDENTIAL

Developers will experience higher cost of inputs and margin compression pressure. Pricing also depends on supply and demand situation.

Service charges and sinking fund are tax exempt JMC has to absorb GST incurred on input

COMMERCIAL

Purchasers will bear GST. There are implications to overall price and financing.

Service changes and sinking fund are subject to GST JMC can claim GST incurred on input

GST registered companies will be able to claim input tax on GST incurred.


Regardless, properties in strong locations, with good features will still command strong values.


THANK YOU

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