Sheda advisor: Developers brace for higher costs as SST expansion hits Sarawak's construction sector
KUCHING (July 3): Sarawak developers are already experiencing noticeable cost increases across the property and construction sector following the introduction of the expanded Sales and Services Tax (SST).
The expanded SST, implemented on July 1, 2025, broadened the sales tax to include a wide range of goods—such as over 240 steel-related products and industrial machinery—and extended the service tax to several new sectors, including six per cent to non-residential construction services.
In a statement, Sarawak Housing and Real Estate Developers' Association (Sheda) advisor Dato Sim Kiang Chiok, highlighted that the costs have risen for both building materials and construction services provided by subcontractors.
He lamented that the property and construction sector is currently going through 'profound challenges' stemming not only from the expanded SST but also from the mandatory e-invoicing system.
Sim, who is also Sarawak United People's Party Stakan chairman, explained that the e-invoicing requirement introduces additional layers of administrative work for property and construction companies.
It requires an investment of time and resources in updating accounting systems and staff training to ensure seamless integration of e-invoices with their financial records.
Sim added that the combination of the expanded SST and e-invoicing mirrors the previous Goods and Services Tax (GST) system, but with increased complexity and the potential for double taxation.
'Unlike GST, SST does not provide tax credits along the supply chain, which opens the possibility of double taxation at multiple stages and increases the final cost borne by the consumers without clear visibility of tax components in pricing,' he shared.
'This lack of transparency means buyers cannot see where taxes are applied, creating confusion and undermining the efficiency such systems aim to achieve,' he stressed.
While the e-invoicing system may improve overall record-keeping and tax compliance, Sim argues that these measures alone will drive construction costs higher, eventually contributing to increased property prices and a higher cost of living.
Additionally, compliance and operational costs are expected to rise further with the upcoming mandatory Employees Provident Fund (EPF) contributions for foreign workers.
Starting in October 2025, foreign workers in Malaysia will be required to contribute two per cent of their monthly wages to the EPF, with employers contributing an additional two per cent.
'These additional costs inevitably impact our budgeting processes, forcing developers to adjust tender pricing upwards to maintain profitability,' he stressed.
He cautioned that without targeted support from the government, these cumulative changes could stifle industry growth and place significant strain on both companies and consumers. lead Sales and Services Tax Sheda Sim Kiang Chiok
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