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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.
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.2
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.
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.3
* 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
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.4
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
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.5
+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
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.6
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
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.7
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
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.8
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
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.9
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
to next buyer/ tenant
Commercial Property Purchase
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.10
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
to next buyer/ tenant
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
to next buyer/ tenant
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.
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.11
Regardless, properties in strong locations, with good features will still command strong values.
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.12
THANK YOU