PUTAJAYA: The Royal Customs Department today defended the issue of the goods and services tax (GST) exemption given to China Communications Construction Company (CCCC), which is building the RM55 billion East Coast Rail Link (ECRL).
He said such tax exemption is not new.
“If the exemption is not granted, the government will have to bear the GST cost in procurements.
“This will mean increasing the amount of the loan to cover the tax cost as otherwise it will suffer a loss,” said Customs director-general Subromaniam Tholasy.
“We must remember the ones who receive the benefit are our own people, not the Chinese company. We should understand the GST mechanism.”
Subromaniam said the administration of former prime minister Dr Mahathir Mohamad also granted tax exemption for government projects such as the Kuala Lumpur International Airport in Sepang and Bukit Jalil Stadium.
Other large projects which also received tax exemption included independent power plants (IPP), the Smart Tunnel, Express Rail Link (ERL) and the Mass Rapid Transport (MRT), said Subromaniam.
He said these exemptions affected the collection of sales and service tax (SST), but there is a slight difference under the GST scheme as the government did not suffer any revenue loss.
Subromaniam said the GST system also has a mechanism to reduce the tax burden for targeted groups.
The GST, which imposes a 6% levy, replaced the SST as a consumption tax in April 2015.
Subromaniam was responding to recent criticisms of the GST exemption given to CCCC by mainly opposition leaders.
They included Amanah vice-president Husam Musa, who revealed that an exemption certificate was granted to CCCC under Section 56(3)(a) of the Goods and Services Tax Act 2014 by the finance minister.
“Why should Malaysians, local companies and state governments be forced to bear the GST while a foreign company is exempted?” asked DAP Bukit Mertajam MP Steven Sim.
Subromaniam said he was willing to meet the critics who questioned the decision to give the exemption.
“When we look at what’s written on social media, I wonder whether they understand the tax issue or they are intentionally creating an issue to confuse the public and distort the facts.
“If they don’t understand, they should come to us and we will explain.
“I appeal to those who are attempting to twist the issue to stop it.”
He said the confusion on social media showed the need to have a law to curb fake news.
“Don’t blow up this issue. Ask if you don’t understand. I support the Anti-Fake News Act.
“Enough, because the public are easily confused,” he said.