A QUESTION OF BUSINESS | Let’s start by examining who exactly benefits from the GST exemption for that China company. It does not reduce the cost of the RM55 billion project but we will show without any doubt that the benefit all goes to that China company - as much as RM3.3 billion.

This project will become more toxic in future simply because it is unviable and too expensive, and there may be more such projects in the pipeline if this government stays in power. And that may give enormous undue advantage to China companies and it will work against Malaysian interests.

On Monday, Amanah vice-president Husam Musa disclosed documents which purportedly showed that China Communications Construction Company (CCCC), the contractor for the East Coast Rail Link (ECRL), was granted a relief from paying goods and services tax (GST).

Yesterday, Customs director-general Subromaniam Tholasy confirmed that Putrajaya granted CCCC, through China Communications Construction (ECRL) Sdn Bhd or CCC (ECRL), a relief from paying the GST in its procurement for the massive rail project, as a method to reduce the cost of implementation.

Shortly after, BN strategic communications deputy director Eric See-To had a different spin - according to Malaysiakini, he said in his Facebook posting that the GST relief avoids unnecessary processes and expenses.

"For the ECRL project, the final customer is the government. If GST is collected, then the government has to pay GST to the government. How senseless is that? (It is, therefore) better to (grant an) exemption, which is provided for by the law so that unnecessary processes and expenses can be avoided."

Both Subromaniam and See-To are wrong - if there was GST, the net benefit would be neutral to the government because the tax would accrue to the government and therefore would defray the increased expenses of the ECRL, which is government-owned.

But an exemption now will mean that the government will lose 6% in GST, or RM3.3 billion, and the entity who will gain is CCCC because they are not giving back RM3.3 billion to the country.

Note that the award of the ECRL construction contract to CCCC was signed and sealed on Nov 1, 2016 - 19 months after the implementation of the GST on April 1, 2015. The contract price must have included the GST then. Also the documents that Husam revealed, indicate clearly that the Malaysian unit of CCCC, CCC (ECRL), obtained the exemption only in Feb 7 this year, over 15 months from that contract date.

The document is purportedly a letter by CCC (ECRL) to a local contractor, Permata Timur Resources Sdn Bhd, instructing the latter to insert the following on its tax invoices to the former: “Relief under Section 56(3)(a) of the GST Act 2014 claimed based on letter issued by the Ministry of Finance No. (8.09)248/39/7-1460(69) dated 7 February 2018.”

That means the government forgoes GST of as much as 6% of the RM55 billion project cost of the ECRL or RM3.3 billion. This goes to the CCCC as a pure addition to whatever profit it is making from the construction of the ECRL...