KUCHING: The implementation of the expanded Sales and Service Tax (SST) has led to significant cost increases in Sarawak’s construction sector.
Sarawak Housing and Real Estate Developers’ Association (SHEDA) advisor Datuk Sim Kiang Chiok said the rise in construction costs is largely due to building materials and professional services – including architects, engineers and consultants – being subject to the new SST structure.
“Subcontractor services are also affected, which adds directly to our project costs. These increases are not minor, and they are already affecting our budgeting and tender pricing,” he said this in a statement today.
Sim stressed that the tax burden is particularly heavy on medium and large contractors, who are not eligible for exemptions granted to smaller players with an annual turnover below RM1.5 million.
“This situation puts larger contractors at a disadvantage. While we are forced to adjust prices upwards to stay viable, smaller contractors can maintain lower prices, which makes competition uneven,” he said.
He added that the new requirement for contractors to contribute an additional 2 per cent + 2 per cent Employees Provident Fund (EPF) for foreign workers is further compounding operational costs.
“This is another layer of financial strain. Every increase, from SST to EPF contributions, eventually flows down to the consumers in the form of higher property prices,” he said.
Sim also highlighted concerns over the mandatory e-invoicing system, describing it as a measure that imposes additional administrative and compliance burdens on developers.
“While micro-enterprises may be exempt, medium and large firms like ours must invest in system upgrades, staff training, and integration of e-invoicing processes,
“This is all while still preparing annual accounts for tax purposes,” he noted.
He likened the combination of expanded SST and e-invoicing to the previously scrapped Goods and Services Tax (GST), but with even more cumbersome procedures and without the benefit of input tax credits.
“SST opens up the possibility of double taxation along the supply chain. There’s also no clear visibility of tax breakdowns for the consumer, which adds confusion and undermines the efficiency the system aims to achieve,” he said.
Sim warned that without proper government support or mitigation measures, the combined impact of these changes could stifle industry growth and place significant pressure on both developers and property buyers.
“The end result is simple: higher construction costs, higher property prices, and ultimately, a higher cost of living,” he said.