PETALING JAYA: Owners of condominiums, apartments and flats have been told to brace themselves for higher maintenance charges from April although such fees have been exempted from the Goods and Services Tax (GST).

Building Managers Association of Malaysia (BMAM) president Tan Sri Eddy Chen warned that the rise could be more than 10% to meet the anticipated higher operating costs.

He said although GST would not be imposed on maintenance fees, the management bodies still had to pay GST when they called service contractors like electricians to fix problems.

Chen said maintenance fees should be set higher than 6% if the non-payment by defaulters were taken into account.

"In the case of low and medium cost flats, about 40% of the owners do not pay their monthly maintenance fees of between RM35 and RM70 monthly.

"So, even if only 50% pay, the maintenance fees will have to be increased by 12% to cover the shortfall and the 6% in GST to be paid to service providers."

BMAM is an umbrella body comprising 25 stakeholder organisations representing management corporations (MCs), joint management bodies (JMBs), chambers of commerce, developers, engineers, architects, shopping and high-rise complex managers and managing agents.

BMAM deputy president Tan Sri Teo Chiang Kok said there were currently 1.8 million strata properties in the country, out of which 90% are residential.

He said the association was concerned that more low and medium cost flat owners might default when the GST kicked in.

"We have reminded all JMBs and MCs to call for open tenders and only select those offering the best service at the lowest cost (to keep maintenance fees low)," he said, adding that owners might reject a proposed fee rise during the JMB or MC general meeting but "they cannot escape the GST".

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) and National House Buyers Association (HBA) adviser Wong Kok Soo said 99% of the maintenance charges collected by JMBs and MCs were channelled to the service providers, contractors, suppliers and utilities, which were all subject to 6% GST.

"They will be compelled to increase their maintenance charges to pay the GST input tax," he said.

He said that in January, a petition was sent to the Finance Ministry by the HBA, PEPS, the Royal Institution of Surveyors Malaysia (RISM) and Malaysian Institute of Professional Property Managers (MIPPM) to exempt the maintenance charges of all stratified properties for residential usage from GST.

However, he said only goods and services under the zero-rated supply list would be able to get a GST input tax refund from the Customs Department.

"The HBA, PEPS, RISM and MIPPM had a discussion with the Finance Ministry, Federal Treasury and Royal Malaysian Customs representatives recently and will continue to engage with the authorities until all major problems regarding GST in the stratified development areas are resolved," he said.

BMAM treasurer Prof S. Venkateswaran said exemption was preferable to zero-rated status.

"As it stands, JMBs and MCs with revenues less than RM500,000 a year are automatically exempted from GST. Most low and medium cost flat JMBs and MCs come under this category.

"Assuming that JMBs and MCs with revenues exceeding RM500,000 a year are granted zero-rated GST status, the move would still result in some JMBs and MCs facing serious financial problems as being zero-rated would require the JMBs and MCs to have GST software and hardware in place.

"This will cost a minimum of RM4,000 to RM5,000 per month, including cost of staff," he said.

He said overall, it was less expensive if all JMBs and MCs were granted a blanket exemption from GST as they would be able to save on administrative costs and procedural hassles when filing claims for GST refunds.

"No matter which way it goes, GST will invariably bring an up-front increase in costs for all owners, suppliers and service providers," he said.