Lorraine Parkin Senior Executive Director of GST (2nd from left) with others from (left) Seah Siew Yun Senior Executive Director, Sian Sinclair Global Head of Real Estate & Construction, N.K. Jasani Managing Partner and Rodger Flynn Regional Head Asia Pacific, during the Grant Thornton Press conference on the impact of goods and services tax on the Malaysian property industry in Kuala Lumpur yesterday.(11/8/2014) – S.S.KANESAN/The Star)
KUALA LUMPUR: Big ticket items, such as real estate and cars, are likely to see a lull in their respective markets after the implementation of the goods and services tax (GST) come April 1, 2015, says an accountant.
According to independent assurance, tax and advisory firm Grant Thornton, the same had happened in the United Kingdom and Australia when the value added taxes were introduced in 1973 and 2010, respectively.
“As in Australia, the lull in the property market could last for about three months. Businesses should be mindful of this,” said Grant Thornton real estate & construction global industry leader and tax partner Sian Sinclair.
“Consumers held back for a time and we foresee the same happening here. It may or may not be the same for cars, depending on your sales tax. In Australia, GST made buying cars cheaper so everyone waited for that.”
At the same time, businesses need to ensure their contacts allow GST clauses to their sales and rent agreement, or businesses making taxable supplies at the standard rate could see their profits decreasing by 5.66% if they have to account for GST out of their receipts, said Grant Thornton’s head of indirect tax in the UK Lorraine Parkin, who is also Grant Thornton Malaysia’s senior executive director for GST.
“This means hidden GST cost may occur in residential developments as developers won’t be able to reclaim the GST incurred in running costs.
“It’ll either impact the bottom line or alter the unit value of residential premises,” she said, adding that as of last week, only 3% of businesses in general had registered for the GST.
“Businesses making mixed supplies will need to consider a partial exemption recovery method and be prepared to undertake capital goods adjustment,” Parkin said.