PUTRAJAYA: The government had granted tax exemption under the Sales and Services Tax (SST) system to several mega projects since the 1980s under the leadership of then-prime minister Tun Dr Mahathir Mohamad.
Customs director-general Datuk Seri T. Subromaniam said some of the projects that were given tax exemption included the Kuala Lumpur International Airport (KLIA); Express Rail Link, Smart Tunnel; Bukit Jalil Stadium; as well as to independent power producers.
"Under the Approved Service Project, the then government had granted tax and duty import exemption to the machines and equipment used for projects in the transport, telecommunication and utility sectors.
"So why is it only now that people want to bring up the issue of the Goods and Services Tax (GST) relief to the East Coast Rail Link (ECRL) project? Why didn't they question the tax exemption for other mega projects during Dr Mahathir's time?
"Some people do not understand the taxation system. They simply spin the story without checking the facts and spread fake news on social media as if the government is giving away privileges to a foreign company, whereas the local companies and Malaysians have been ‘oppressed’ into paying GST. This is untrue," he told a press conference here on Thursday.
Subromaniam said if GST relief was not given to China Communications Construction (CCC) Sdn Bhd for the ECRL project, the cost of the project would be higher, thus increasing the country’s debt and Malaysia would suffer a huge loss.
"Yes, it is true that the government has given GST relief to a company in China, but you must bear in mind that ECRL is a project owned by Malaysia. The real owner is Malaysia Rail Link Sdn Bhd while CCC is only the intermediary.
“People have to understand the GST concept. It is a tax that must be borne by the end consumer. So in this case, the end consumer is the Malaysian government. So if GST relief is not given, the government will have to fork out from its own funds to cover the GST cost. This will involve the country’s debt,” he said.
He said the SST system is a single-tier system where, if exemption is given, the government sustains a direct loss. He said that during Dr Mahathir’s era, although the government had lost money through SST, it still gave exemptions to several projects.
“The GST system, on the other hand, is different because when you give exemptions, they are not able to seek refunds on import credit tax and there are no refunds. So the government made the best decision in giving GST relief to the ECRL project.
“In the end, it is Malaysians who will benefit from this infrastructure project linking Port Klang to the East Coast. In fact, we gave only GST relief to the ECRL project, we did not grant duty import exemptions like we did to projects during Dr Mahathir’s time,” he said.
Subromaniam added that the GST relief was granted by the Finance Ministry based on a recommendation by the department.
“We made the recommendation after considering the pros and cons of the GST on the project, and how it could benefit the people and the country. We don’t simply recommend tax exemption or relief without any basis.
“Any company and anyone can apply for GST exemption or relief, as long as they are in the transport, telecommunication and utility sectors. The question is whether that project can benefit the government or the people. If it’s not, then it would be difficult,” he said.
Asked if the department would consider taking action against those who spread fake news on the GST under the Anti-Fake News Act, Subromaniam said the department is keeping its option open.
“Don’t push us too far. We are keeping our options open (before taking legal action).
“I really support the newly-gazetted Anti-Fake News Act. But then, enough is enough. Just stop spinning this issue and circulating false news,” he said.
On Tuesday, Subromaniam, in a statement, said CCC had been given GST relief for the ECRL project, aimed at reducing costs in implementing a project involving public interest.