Say hello to the Goods and Services Tax (GST)! With a 6% tax implemented on April 1 this year it is understood that non-basic items and services will be taxed, and costs will increase while basic food items (including sheep, cattle, goats, poultry, fish, swine, crustaceans, and vegetables), education, healthcare (such as nursing, pharmaceutical, and dentistry) and 2,900 medicinal items (including medical treatment and apparatus, and blood banks), are spared. But the question remains on whether the maintenance fees of condominiums, apartments, and flats will be affected by GST.
Initially, some feared that GST will cause condominium maintenance fees to increase by at least ten percent. Others believe that while there is that possibility, the increase will not be so drastic as to burn a hole in your wallet - perhaps a mere three to six percent? The victims of GST are ultimately owners and proprietors of high rise properties as they are the ones who contribute financially to maintain and upgrade their properties. Many have requested for an exemption of the GST on these fees so that it will ease their burdens. Citizens who fall in the low to average income bracket will definitely benefit from zero-rated GST as they will be spared from having to fork out more money than they can afford to.
The GST hike was also a concern amongst high rise owners who suffer from residents that neglect to pay up their share of the maintenance fees as it could be seen as an unfair penalty to those who pay up as opposed to those who do not.
Fret not, because on February 26 this year, Deputy Finance Minister Datuk Ahmad Maslan announced that the maintenance fees for all types of stratified residential properties will now be exempted from GST. The exemption applies to all types of apartments, flats, and condominiums - luxury or otherwise.
Maslan also noted that the maintenance fee is more of a service operated by the residential committee, and not so much of it being a profit-earning organisation. Another factor that put a smile on the faces of property owners is that building maintenance is a service that affects a lot of people, similar to how public transport services would, and this led to the government’s decision to remove the GST on stratified residential properties.
In spite of the positive outcome, high rise property owners have been warned to brace themselves for higher maintenance charges from April 2015 onwards, because despite the exemption of GST on such fees, management bodies will still have to absorb the tax charges when they call upon service contractors like technicians and electricians to do what they do best.
To give you a clearer insight on this, manufacturers of plumbing materials and other raw materials with turnover sales of RM500,000 and above are accountable for GST. As a result, these suppliers will be slapped with the six percent tax, which will then be imposed onto your regular plumber who is at the end of the supply chain, so refrain from putting blame on the guy who plays a large part in making sure your toilet flush works fine.
At the end of the day, it is a never-ending cycle. The government may have exempted maintenance fees from the Goods and Services Tax, but residents of stratified residential properties should nevertheless hang on tight and take preemptive moves to prepare for an increase in the near future (which we hope will not happen, like, ever).