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Penang, Terengganu, And Johor Are Absorbing The GST For Local Authority Services

An increasing number of state governments are starting to absorb the costs of the GST on selected local authority services without the federal government's approval.

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Sarawakians will not need to pay for GST on local government services

Sarawak Chief Minister Tan Sri Adenan Satem says the state will absorb GST imposed on local government services.

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Chief Minister Adenan Satem said that the public was facing an increasing cost of living after the implementation of the GST.

"The GST causes prices of goods to go up which is beyond my control. But the state government was trying to find ways to lessen the people's burden. This is a Federal matter, not a state one," he said on 24 May at a ceremony to end toll collection at Lanang Bridge.

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But Adenan did not say when it would take effect. This includes abolishing the collection of tolls at bridges in the state, lowering ferry charges to just RM1 from RM6 per usage, and lowering the electricity tariff for residential and commercial users.

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He also said he would continue discussions with Petronas to increase petroleum and gas royalty for Sarawak from 5% to 20%. Petronas has so far allocated RM2.1 billion in contracts for Sarawak companies.

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Meanwhile, the Selangor government will request for Goods and Services Tax (GST) exemptions for its 12 local councils from the federal government

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"We will write a letter to the Finance Ministry to request for exemption for local councils. This move was decided in the Exco meeting. If the Ministry can give exemption to the public services sector, we can accept it," Selangor Mentri Besar Azmin Ali said on 13 May.

The decision was made two days after he confirmed that Selangor won't absorb the GST on services provided by the state's local councils in order not to contravene any laws and won't be following the path undertaken by Johor and Penang.

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Azmin said, "We can't compare with Penang since they have only two local councils. In Selangor, we have 12 local councils and most of it are local councils with a big or considerable urban population"

"I have instructed the State Economic Planning Unit to study the amount the state government has to bear and other implications we have to face if we have to absorb GST," said Azmin.

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12 May: The government of Johor announced that 16 of the state's local councils have been instructed to stop charging the Goods and Services Tax (GST) for its services after the Sultan of Johor criticised the implementation of tax on public services

The Sultan of Johor, Sultan Ibrahim Ibni Sultan Iskandar.

Image via Tazit Raazali/NST

Johor has instructed all its 16 local councils to stop charging the Goods and Services Tax (GST) for its services to the public on 10 May.

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On 8 May, Johor Ruler Sultan Ibrahim Ibni Sultan Iskandar had directed the state government and local councils to request an exemption for GST on public services. He said it was not logical to im­pose the tax on public services as it was the duty of the state go­­vern­ment and local councils to pro­­vide free services for tax payers.

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Johor Housing and Local Govern­­ment exco Datuk Abdul Latiff Bandi said that GST charges had already been absorbed by the state government two weeks after the GST was implemented on 1 April. GST collected during the first two weeks of implementation will be refunded and reimbursed for.

The local authorities services in Johor that have been absorbed include rentals for local council facilities and licences fees. The state government will absorb the GST costs for local councils, which are expected to be RM3.19 million involving 16 local councils state-wide this year.

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Johor Housing and Local Govern­­ment exco Datuk Abdul Latiff Bandi said that the Johor government has also sought exemption from the Urban Wellbeing, Housing and Local Government Ministry so that GST will not be imposed on services provided by the state local councils. “The request was conveyed to the minister Datuk Abdul Rahman Dahlan recently and we were told that the matter would be brought up in Cabinet,” Latif added.

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Similarly, the state government of Terengganu has stated it will absorb nine components of services under the local councils starting from 11 May onwards. These services include rentals, leases, and fees.

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The services include rents of Kuala Terengganu City Council’s building and premises, rents of markets, leases of land, leases of markets, leases of parking lots, and rents of sport facilities.

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Mentri Besar Datuk Seri Ahmad Razif Abdul Rahman said that nine components of services would be absorbed and these included rentals, leases and fees under the state government’s seven local councils.

“The state government has decided to absorb the GST costs for local councils, which are expected to be RM1.6mil, involving all seven local councils this year. This will be effective immediately today (11 May),” he said in a statement.

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He said the state government decided to absorb the GST at the April 22 executive council meeting.

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In Penang, the Penang Island City Council (MBPP) and Seberang Jaya Municipal Council (MPSP) will absorb GST imposed on its local authority's projects, services, and contracts starting from 1 July. It will also include GST collected on behalf of the federal government.

Penang Chief Minister Lim Guan Eng says the Penang Island City Council (MBPP) and Seberang Prai Municipal Council (MPSP) will be absorbing the goods and services tax (GST) beginning July 1.

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On 11 May, Chief Minister Lim Guan Eng said Penang will absorb the GST for projects, services and contracts carried out by the local authorities starting July 1. "The state will also absorb the GST collected from the people by the local authorities on behalf of the federal government, like parking fees, rentals of land and buildings," he added.

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The GST that will be absorbed will be for services such as parking, hawker stall rental, halls rental, food court rental and other services. He said this was also on top of the GST both council have to pay for its infrastructure and community projects. This brings the total GST obligations of the MPSP to RM5.822 million and RM15.631 million for MBPP.

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Lim said the state government would continue to ask the federal government to exempt the tax from local councils. "We have already written to the prime minister on the matter, but there has yet to be a reply. "We will continue to write to Putrajaya on this," he said.

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Customs Department GST director Datuk Subromaniam Tholasy said on 11 May that local councils are "better off" with the GST system compared to the previous Sales and Service Tax (SST) system, as the provision of federal and state governance, quit rent, and other property tax does not have GST. The department will also meet local councils in Johor to explain GST in detail.

Local councils are much “better off” under the Goods and Services Tax (GST) system compared to when the Sales and Services Tax (SST) was in place. This is because they can now claim tax on purchases of vehicles, lawyer fees, security services and such said Subromaniam at a joint press conference on 11 May.

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Subromaniam said under section 64 of the GST Act 2014, the tax was not imposed on the provision of federal and state governance. “This also applies to local authorities and statutory bodies on the supply of regulation and enforcement activities,” he told a press conference at the Finance Ministry.

It should also not be imposed on other taxes such as quit rent and other property taxes. He added only business activities such as the rental of halls and premises by the authorities were subject to GST.

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Subromaniam said his department would meet with local councils in Johor to explain the GST to them in detail.

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Subramaniam also said that all tools and equipment for persons with disabilities (OKU) have been granted relief from the Goods and Services Tax (GST)

All tools and equipment for persons with disabilities (OKU) have been granted relief from the Goods and Services Tax (GST), says Customs Department GST director Datuk Subromaniam Tholasy.

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According to Customs Department GST director Datuk Subromaniam Tholasy the disabled could enjoy GST exemption for purchases of disability aid.

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However, he said to be eligible for the GST relief, the disabled must produce a certificate signed by the head of a private charity organisation registered with the Social Welfare Department, even though they already had their OKU cards.

Among the items granted the GST relief were artificial limbs, wheelchairs, electrically or mechanically adjustable beds designed for the physically disabled, Braille embossers, text telephones for the speech impaired, whistling cups and white canes for the visually impaired, specialised footwear, and hearing and low-vision aids.

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Following Subromaniam's believe that local councillors are "better off" post-GST, here are some of the reasons we think that could support his claim:

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