Why charge GST on maintenance fees

More than 15 management corporation (MC) heads, representing more than 30,000 residents living in apartments and condominiums in the Klang Valley, came together today against the implementation of the 6% goods and services tax (GST) on their monthly management and maintenance fees next year.

Saying that it penalises them over landed property owners, the group also said there was a lack of thought that went into the plan to charge GST on Management Committees (MCs) that collected more than RM500,000 annually as the ruling did not specify the density of the strata projects.

Seputeh MP Teresa Kok, who attended the press conference at the Kuchai Brem Park condo community hall in Kuala Lumpur today, called on the relevant agencies to clarify the grey areas.

She said many low-medium-cost apartment MCs would be collecting more than RM500,000 in yearly maintenance because of the higher number of units.

A resident of Brem Park 2, C.W. Tay said this would also mean that those who lived in high-end condo projects with limited units would escape the GST as their maintenance fees collection per year could be less than RM500,000. As such, he called on Putrajaya to explain how it classified strata projects into low-cost, low-medium and high-end categories.

MC secretary for Abadi Indah Apartment in Taman Desa Christy Loh asked who would make up for the shortfall from defaulters who did not pay their maintenance fees, adding that on average, about 20% to 30% avoided paying maintenance fees.

"So who is going to pay for their GST portion when they default?" she asked.

MC chairman for the Kuchai Brem Park 2 condo project Raymond Lee said Malaysia was not ready to follow in the footsteps of Singapore in charging its condo dwellers GST as the latter was a high-income nation.

Lee added that the Malaysian government probably had the wrong impression all those who lived in condos and apartments in this country were rich.

He said he was a retiree who bought his unit in Brem Park for RM82,000 in 1988, adding that the unit was now worth RM350,000.

"I am a retiree and not orang kaya (rich person). But given the security situation in Malaysia, many of us choose to live in condos where there are security facilities, but don't get the wrong idea that we are rich."

Kuchai Brem Park 1 condominium chairman Lim Kah Pin said that residential MCs were non-profit organisations and had no commercial activity.

He added that their statutory duty under the Strata Titles Act was to collect maintenance fees from residents and were responsible for the upkeep of facilities, such as housekeeping, landscaping, security services, lift, CCTVs and electrical and mechanical services among others.

"Unlike commercial MCs, we are non-business related.

"Residents paying their maintenance charge is akin to family members contributing monthly expenses for household expenses, such as food, utility bills and other family-related expenses," Lim added.

The press conference was held following a notice from the Finance Ministry to the Kuchai Brem Park residents informing them that GST would be imposed on MCs collecting more than RM500,000 in maintenance fees.

The letter dated October 29 also mentioned that GST would only be exempt for low-cost and low-medium cost apartments.

In a following letter dated November 17 pursuant to the appeal by the Brem Park residents, the Finance Ministry wrote that the principle of GST did not differentiate whether the activity was for profit or otherwise, asserting that even activities conducted by non-profit organisations were subject to GST regulations.

The letter also mentioned that the Goods and Services Act 2014 stated that the services of an MC and Joint Management Body (JMB) were classified as conducting a business, adding that, as such, both entities were deemed to be doing business although they were primarily to serve residents.

The ministry also noted that under GST, there was no differentiation between an MC and JMB of a residential condominium and a commercial condominium.

Lim, however, said today the ministry was presuming that low-income earners and the poor only inhabited low-cost and low-medium cost apartments, adding that this was a mistaken belief.

"The truth is many low-income earners live in residential condos, including hawkers, taxi drivers, single parents, retirees and pensioners.

"If the ministry feels that the 6% should be imposed on condo dwellers, then it should be applied to all residential units.”

Kok also raised the issues of another grey area, related to the sinking fund, where she said some MCs collected sinking fund as part of the maintenance fee.

"So will the sinking fund also be imposed the 6% GST or are they going to apportion it out?

"How will they do this?"

Kok said that she would continue to raise the issue in Parliament next week with the relevant ministries and agencies. - By JENNIFER GOMEZ (www.themalaysianinsider.com)

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