KUALA LUMPUR, June 10 — The upcoming sales and service tax (SST) revision and expansion is unlikely to affect contractors primarily involved in residential housing, such as MGB Bhd and Kerjaya Prospek Group Bhd, according to RHB Investment Bank Bhd.

However, it said contractors involved in constructing commercial, industrial, and infrastructure projects — Sunway Construction Group Bhd, Gamuda Bhd, and IJM Corporation Bhd — will be imposed with the six per cent services tax for construction services.

“Contractors could factor in the six per cent services tax when bidding for new projects.

“For ongoing projects, contractors could likely readjust or reprice the contract sum for reviewable contracts to take into account the latest expanded services tax,” it said in a research note today.

To recap, the Finance Ministry said the reviewed and expanded SST announced in Budget 2025 will be effective July 1, 2025, with a five to 10 per cent sales tax to be imposed on selected non-essential goods.

The service tax will be expanded to include services such as construction services, which would see a 6.0 per cent service tax applied to providers exceeding RM1.5 million in annual revenue.

Meanwhile, RHB Investment Bank said residential buildings and public housing-related works are exempt from sales tax. Exemptions also apply to business-to-business transactions to avoid double taxation.

“We also take comfort that under the sales tax revision, the government is maintaining a rate of zero per cent for basic construction materials,” it said.

On the other hand, the investment bank said the data centres, the main construction segment theme, are likely to remain intact despite the expanded SST.

"Assuming a hyperscaler hypothetically has three new data centre projects in Malaysia worth RM1 billion each to be awarded to a contractor, the services tax on the contractor’s work would amount to RM60 million per project or RM180 million in total.

“This represents approximately 0.2 per cent of the financial year 2024 net income of hyperscalers such as Google and Microsoft,” it said.

It has maintained its “Overweight” call on the construction sector. — Bernama