Customs director-general Subromaniam Tholasy said Putrajaya granted China Communications Construction Company (CCCC) a relief from paying goods and services tax (GST) in its procurement of the East Coast Rail Link (ECRL), as a method to reduce the cost of implementation.

In a statement yesterday, Subromaniam explained why the Customs Department had backed the tax relief certification signed by the finance minister.

This is after Amanah vice-president Husam Musa uploaded on Facebook a certificate of GST relief for the acquisition of goods and services for the ECRL project, issued in the name of CCCC. 

The certificate said the relief was granted under Section 56(3)(a) of the Goods and Services Tax Act 2014, which concerns the finance minister's power to grant GST relief.

"There is a mechanism in GST that is meant to reduce the impact against the targeted group. We will consider the application by the eligible company for tax relief from time to time.

"We gave our support for the consideration of a relief by the finance minister to CCCC for several reasons," said Subromaniam.

Among others, he said, ECRL is a government-to-government project, and is also a "tie-in project" that has been granted tax relief after taking into consideration the fact that the interest on the loan offered was “better” than the cost of GST.

The Malaysian government is financing the approximately RM60 billion project through a soft loan from the Export-Import Bank of China and debt raised in the bond market.

Subromaniam added that the company will not be allowed to apply for any refund from GST payment.

“The decision will reduce the implementing cost for this project, which is of public importance and public supply-orientated,” he noted. 

Subromaniam said that in general, the tax relief is aimed at ensuring that the strategic ECRL project will be successful and benefit the public. 

The certificate shown by Husam was accompanied by a letter carrying the  CCCC letterhead informing its supplier that it had been granted GST relief based on a letter by the Finance Ministry dated Feb 7 this year.

It added that the GST relief was effective Sept 26, 2016.

"How true is this? China company being granted GST relief. I request that the Finance Ministry explain," Husam had said in his Facebook post.

Around 600km in length, the ECRL will link up Port Klang with key cities on the east coast of Peninsular Malaysia including Kuantan, Kota Bharu and Kuala Terengganu.