YOURSAY | Is the RM55bil quotation from CCCC already inclusive of GST?
ECRL - Gov't saving money with GST exemption
P Gunasegaram: I am the writer of the article that BN strategic communications deputy director Eric See-To refers to – ‘With GST exemption, toxic China connection begins to show’.
The key question is whether the RM55 billion contract cost includes the cost of GST. And if it does not, it raises the question of why the government did not include the cost of GST in the pricing, some 19 months after the implementation of the GST.
If the RM55 billion includes GST, there is no question that China Communications Construction Company (CCCC) gains and the government loses to the tune of over RM3 billion.
Either way, it shows pretty shoddy project management.
Prudent: Spot on, Gunasegaram. If GST was not built into the original cost of RM55 billion, the question arose as to why not?
And if the agreed original cost includes GST and the Chinese company is now exempt, the government effectively pays GST to the Chinese company, unless the 6% GST is somehow returned to the government.
But See-To is spinning that the government "saves" money on additional finance cost by exempting the Chinese company from GST.
In this, See-To assumes that the original cost of RM55 billion excludes the 6% GST - which is unlikely since the project was costed after GST was implemented.
Anonymous_b3cdcd05: See-To's explanation looks like the now familiar BN “head I win, tail you lose” SOP (standard operating procedure).
In a nutshell, he argues that the ECRL project cost of RM55 billion, and if subject to GST, will increase by 6% to RM58.3 billion. So Putrajaya has excluded GST to reduce the people's burden of repaying a bigger loan.
But what the people are asking is - what if the GST was already built into the project cost of RM55 billion? When the GST of 6% is exempted, who will get the RM3.3 billion bonanza?
Anonymous_6dbc1dbc: See-To has yet to answer one straightforward question - is the RM55 billion quotation from CCCC already inclusive of GST?
Yes or no. And show us the proof. If the answer is yes, then the GST relief granted by the government will give CCCC additional 6% profit.
So there is no point to keep boasting about how a RM55 billion project will increase to RM58.3 billion if GST is not exempted. Show us the proof.
Oscar Kilo: No, See-To, the government is not the final buyer. The ECRL user is the final buyer.
In this case, the ECRL train tickets and freight charges should be GST exempt since there was no GST charged on the contractor. And the electricity that ECRL buys from TNB should also be GST exempt.
Why is See-To so concerned about reducing the financing costs when the soft loan interest rate is so low, which the PM has been boasting about?
In fact, the government should be charging GST so that the government gets 6% of the RM55 billion, and then can invest that 6% in any investment or instrument that gives higher returns than the loan interest rate (which is supposedly very low, like 3.25%). Voila! The government makes a net profit.
On top of that, the government can collect the 6% GST and spend or invest it now, whereas the loan is only due to be repaid after seven years
Joseph_183: See-To, you got a point there. So to encourage more savings, shouldn't the government provide GST exemption to everyone that supplies goods and services to the government?
Shovelnose: I will just simplify this matter with an analogy - government departments do not pay for postage as it taking from the left pocket to pay the right.
However, this depends on how the ECRL is structured. The asset holder for ECRL is Malaysia Rail Link Sdn Bhd, apparently a wholly government-owned entity.
What makes it interesting is that it could eventually be listed and commercialised. Therefore, as a commercial and for-profit entity, it would be selling tickets with GST.
The for-profit part is a wishful thinking as it may follow the KTM experience - continue to pump in money year after year.
Hence, the GST is only a small component compared to the loan interest for the construction cost, and not to mention the long-term operation and maintenance cost.
Cogito Ergo Sum: Let’s say I own a restaurant and I charge 6% mark up on the menu. One day I and my family eat at my own restaurant. Do I charge the markup or do I waiver it so that the cost of the meal is lower?
If I do not charge myself the markup, my revenue is less by 6%. And let’s say I set aside a portion of my mark up for an orphanage. It means if I don’t pay the normal price, the orphanage gets less.
Similarly, the GST is a consumption tax and monies collected are used for developments and other projects. By not charging GST on the ECRL, you are forgoing development and income in some sectors.
And the velocity of circulation of money in the economy is now less because of the loss from lower GST revenue.
See-To, it’s not as simple as you make it out to be. There are far more complex variables in the equation. You have reduced the whole thing to a simplistic argument that only you and BN will buy into. Try harder, please.
Anonymous_1371488694: GST is a value-added tax. Does it mean that the Chinese company is not adding any value?
If it does add value, then it’s paying net GST, and the fact that they are now exempted, that’s a loss to the government coffers.
If this is meant to save the government money, why aren’t all companies involved in government work and tenders be given the same exemption?
Anonymous_1419577444: By See-To's logic, using his example of the shirt, the companies that supply the buttons, the threads, the cloth, the ink and printing on the cloth, the packaging, the labour, to make this shirt, all should be GST exempted because they contributed to the production of product which the government is the final buyer?
So that means there are lots of local companies and contracts that should be GST exempted ... and why are they not?
Anonymous 2449671483368245: RM55 billion for the project is already considered overpriced. If it is also exempted from GST, then RM55 billion would be considered exorbitant.
Helpmepleaae: We give China the project by taking a loan from them. They win on both counts.
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