The opaque GST exemption system must be improved in order to avoid confusion, Malay Economic Action Council (MTEM) CEO Ahmad Yazid Othman said today.

According to Yazid, the government must state the details for a company to qualify for such exemptions to set proper standards.

"Ideally, GST exemption should only apply to critical items such as food, water, input material for agriculture, construction material for low-cost housing, and government services.

"In MTEM's view, GST should be applied to all other transactions to avoid unfairness, especially local firms who are not eligible for GST exemption," he said.

Yazid said this in response to queries from Malaysiakini on BN spokesperson Eric See-To's claim that Putrajaya granted GST exemption for China Communications Construction Company (CCCC) to save cost on the East Coast Rail Line (ECRL).

Read more: ECRL: Gov't saving money with GST exemption

According to See-To, Putrajaya would have had to borrow an additional RM3.6 billion had CCCC not been exempted from paying GST through their suppliers.

The ECRL project is projected to cost RM55 billion.

Yazid argued that if this logic was to be applied, then all government infrastructure projects should be outsourced to Chinese firms to save cost.

"MTEM is of the position that the ECRL contractor should pay GST first before claiming it back, based on the existing procedures.

"If not, all (government projects) should be subjected to the same exemptions to save the government cost. This includes private financing initiatives for public interest," he said.

Yazid also noted that MTEM had previously urged Putrajaya to waive GST for input material for agriculture and low-cost housing as part of its proposal for Budget 2018.

As much as 85 percent of ECRL's cost is being financed by the Export-Import Bank of China, with an interest rate of 3.25 percent.

The 13-year repayment period would only begin on the seventh year of the drawdown.