KUALA LUMPUR: Putrajaya has clarified that the main contractor of the East Coast Rail Link (ECRL) is still subjected to GST on matters not related to the RM55 billion project, after former finance minister Daim Zainuddin questioned the move to exempt the company of the goods and services tax.
“It is important to note that it is the project itself that is exempted from GST and not the main contractor company. They still have to pay GST for non-ECRL related purchases,” a senior government spokesman told FMT.
He accused Daim of “distorting the truth”, after he questioned the government’s justification.
“Daim is clearly helping his old boss to campaign,” the official said, referring to Pakatan Harapan (PH) chairman Dr Mahathir Mohamad under whom Daim once served as the finance minister.
He said the ECRL project was being financed with a soft loan worth RM55 billion, and adding the 6% GST would push the cost up by over RM3 billion.
“The government wants to exempt the project from GST in order to not increase the size of the loan from RMM55 billion to RM58.3 billion and incur possible additional interest charges,” he said.
“When you add in 6% GST, the cost would go up to RM58.3 billion, where the RM3.3 billion GST would have been charged to the government as the final customer, collected by the main contractor to be paid back to the government.”
The official referred to a statement by Customs director-general Subromaniam Tholasy on Thursday that similar exemptions had also been given to large-scale construction projects during Mahathir’s administration.
He said Daim as the finance minister was aware of such an exemption.
“It is regrettable that he chooses to distort the truth as he knows better.”
Opposition leaders have recently criticised the exemption granted to China Communications Construction (ECRL) Sdn. Bhd. under the Goods and Services Tax Act 2014.
Treasury secretary-general Mohd Irwan Serigar Abdullah had said the waiver would ensure that the construction cost would not go beyond the estimated RM55 billion.
But Daim, speaking to reporters after a forum in Langkawi today, said the argument that it was a government project was unacceptable.
“The people are asking, ‘Why am I paying GST? I am paying, but the government does not seem to care’.
“The government just says, ‘Oh, you must pay’. But these people are business people. They will make money anyway. But you still waive the GST for them,” he said.