See-To: Why should government pay GST to itself?

Barisan Nasional ticks off Pakatan Harapan for ignorance about how GST works and about government financing of ECRL project.

The proposed East Coast Rail Link runs from Port Klang to Kota Bharu, and is financed by a soft loan from China.

PETALING JAYA: Barisan Nasional (BN) has criticised Pakatan Harapan (PH) for preying on its supporters’ ignorance by making “senseless” statements about the goods and services tax (GST) and government projects.

BN strategic communications deputy director Eric See-To said that if GST was collected on the East Coast Rail Link (ECRL) project, the government would have to pay GST back to itself.

“How senseless is that?” he said. “How can it be that senior political leaders in PH do not even understand the basic principle of a GST tax system?”

See-To said the ECRL project was financed by a soft loan. If GST was applied, the final cost would rise, thus increasing the cost of repayment.

If GST was applied, the final cost of the project would rise from RM55 billion to RM58.3 billion, he said. The government would have to pay RM3.3 billion extra on the loan, even though that sum would be recovered from GST collected after the project was completed.

His remarks were in response to an online posting by Amanah vice-president Husam Musa, who asked why the government had granted GST exemption to ECRL contractor China Communications Construction Sdn Bhd for goods and services for the project.

See-To said: “It seems PH wants to take advantage of their supporters’ lack of knowledge to incite hatred again.”

He said the GST system was based on the final customer or user paying the amount of the tax. “In the ECRL project, the final customer is the government.”

If GST was collected, it would be the government paying itself. It would be better to grant the exemption provided in the GST Act to avoid unnecessary processes and expenses, he added.

Yesterday, Customs director-general Subromaniam Tholasy said that the Royal Customs and Excise had supported the tax exemption for the ECRL contractor.

Among the reasons was that the ECRL was a government-to-government project and the interest repayable on the loan amount was “better” than the cost of GST.

The East Coast rail project runs for about 600km from Port Klang through the east coast to Kota Bharu.  FMT