SST Update: Residential Properties Under HDA Remain Exempt, Confirms Housing Ministry

Residential Properties Under HDA Exempt from SST: Ministry Clarifies to Ease Developer Concerns

As Malaysia gears up for the implementation of the expanded Sales and Services Tax (SST) framework on July 1, the Ministry of Housing and Local Government has issued a key clarification:
Residential properties sold under the Housing Development Act (HDA) remain fully exempt from the SST, including serviced apartments on commercial-titled land—as long as they are intended for residential use.

This announcement comes after concerns were raised by industry stakeholders about the tax’s potential impact on homebuyers and ongoing construction projects.

🏡 HDA-Covered Projects Remain SST-Free

Housing Minister Nga Kor Ming clarified that the SST exemption applies based on two criteria:

1. Land Title (Residential), or

2. Intended Use (Residential under HDA), regardless of land classification

This means that serviced apartments built on commercial land but registered under the HDA for residential use are still exempt from SST—a point that had previously caused confusion among developers and contractors.

“The SST exemption is determined by either the land title or the intended use of the property,” Nga said in a press statement, following consultations with Finance Minister II Datuk Seri Amir Hamzah Azizan.

🏗️ Industry Pressure Prompted Clarification

The clarification follows intense feedback from:

• REHDA (Real Estate and Housing Developers’ Association)

• Master Builders Association Malaysia (MBAM)

Both groups had warned of potential project cost escalations and housing affordability issues if residential developments were subjected to additional SST burdens.

Their concerns stemmed from expanded service tax coverage, especially for construction services related to non-residential infrastructure, under the new rules beginning July 1.

💰 Key Points on SST Implementation in Construction

✅ What Is Taxed:

• Construction services for commercial, industrial, and infrastructure projects

• Applies only when annual taxable value exceeds RM1.5 million

• A flat 6% service tax is imposed

❌ What Remains Exempt:

• Residential property construction under HDA

• Basic construction materials (cement, sand, aggregates) remain taxed at 0%

• Only 8 out of 400 building material tariff codes are impacted, including:

  • Laminated glass

  • Steel vats

  • Certain netting products

🧾 Mitigation Measures:

• B2B Exemption Mechanism: Tax is only levied once, reducing cascading effects

• Cost Segregation Permitted: Contractors may separate material costs from service charges, so SST only applies to service elements

🛡️ Safeguards for Homebuyers and Affordability

Minister Nga reaffirmed the ministry’s dual commitment:

1. Protecting Homebuyers’ Interests – ensuring new homes remain affordable and exempt from layered taxes

2. Supporting Sustainable Housing Sector – by working with the Finance Ministry and stakeholders to fine-tune tax execution

“We remain committed to fair tax implementation and safeguarding Malaysia’s homebuyers,” Nga emphasized. “The housing ministry will continue engaging with industry leaders to protect affordability under the revised SST framework.”

🧩 Implications for Developers and Buyers

📌 Conclusion

This critical clarification from the Ministry of Housing and Local Government ensures that the residential property sector remains shielded from unintended tax pressures under the revised SST.

It also reinforces Malaysia’s broader goal of balancing fiscal reform with housing affordability, particularly in the wake of global inflation and supply chain pressures.

As the July 1 implementation date nears, developers and contractors are advised to review project classifications, work with tax professionals, and engage with relevant authorities to ensure compliance—while homebuyers can rest assured that HDA-protected units remain SST-exempt.