June 2025 President’s Message
APPEAL REGARDING THE IMPOSITION OF SALES AND SERVICE TAX (SST)]
The Master Builders Association Malaysia (MBAM) urgently appeal to the Government regarding the recent announcement to impose the Sales and Service Tax (SST) on construction services with effect from 1 July 2025, pursuant to the decision made on 9 June 2025.
1. Urgent Need for Clear SOPs and Guidelines
First and foremost, we call on the Government to immediately issue clear Standard Operating Procedures (SOPs), implementation guidelines, and FAQs relating to the imposition of SST on construction services.
This is essential to eliminate confusion and ensure consistent application of the tax across all tiers of the construction value chain. Without clear and timely direction, there is a serious risk of project disruption, compliance errors, and legal and financial disputes.
2. Existing Contracts Do Not Account for SST
The vast majority of ongoing construction projects are executed under fixed-price, fixed-duration contracts, many of which do not contain provisions for cost variation due to new tax impositions. As such:
These contracts do not include provisions to incorporate or recover SST-related costs.
Retrospective application of SST will result in unrecoverable cost burdens, especially for contractors already operating on thin margins.
We urge that SST should not apply to contracts executed before 1 January 2026, to allow for proper financial planning and contractual alignment.
3. Extension of Grace Period for Non-Reviewable Contracts
While we acknowledge the Government’s current plan to grant a 12-month exemption for non-reviewable contracts, we strongly appeal for this to be extended to 24 months.
This will:
Provide a more realistic timeline for ongoing projects to reach completion.
Prevent disputes and complications arising from mid-project tax impositions.
4. Cash Flow Concerns and Timing of Tax Disbursement
The construction sector is already burdened with severe cash flow constraints, including:
Delayed progress claim certifications
Retention sums
High upfront capital costs
Corporate and other taxes
The requirement for SST to be paid based on the invoice date regardless of whether the payment is received is unworkable for many contractors.
We therefore appeal for the SST to be disbursed only after the contractor has received payment from the client (i.e., based on actual cash inflow), particularly for progress-based contracts. This will:
Prevent undue financial strain
Reduce the risk of non-compliance due to lack of liquidity
Avoid pre-financing obligations being unfairly imposed on contractors
5. Segregation of Taxable and Non-Taxable Components
We also urge the Government to issue clear rules to distinguish between the service and non-service components of construction contracts. For example:
Building materials, hardware, and equipment already bear existing taxes and should be excluded from SST computation.
Only the pure service portion should be subjected to SST.
This segregation is critical to avoid double taxation and prevent unnecessary inflation of construction costs.
6.Cumulative Financial Burden
The construction sector already contributes to various existing taxes and levies, including but not limited to:
5% tax on construction machinery
CIDB levies
EPF contributions for foreign workers
HRD Corp levies
Stamp duties on contracts
The addition of SST will significantly raise the overall cost of doing business, affecting:
Contractor viability
National development targets
MBAM remains fully supportive of the Government’s efforts to enhance revenue and strengthen national development. However, we strongly urge for a balanced and carefully phased approach to the imposition of SST on construction services.
We reiterate the following key appeals:
| No. | Appeal |
| 1. | Issue clear SOPs and implementation guidelines without delay |
| 2. | Exclude existing contracts signed before 1 January 2026 from SST |
| 3. | Extend the grace period for non-reviewable contracts to 24 months |
| 4. | Permit SST to be payable only upon receipt of payment from the client |
| 5. | Exempt non-service components (e.g., materials) from SST |
| 6. | Reduce proposed SST rate from 6% to 4% to reduce impact |
| 7. | Avoid any retrospective application |
We look forward to engaging constructively with the Government and relevant agencies to ensure a fair, transparent, and manageable transition for all parties involved.
THE 16TH INTERNATIONAL INFRASTRUCTURE INVESTMENT AND CONSTRUCTION FORUM & EXHIBITION HELD IN VENETIAN, MACAO FROM 10–12 JUNE 2025.
MBAM Honorary Advisor, Datuk Matthew Tee Kai Woon and I represented MBAM to attend the above event co-hosted by the Macao Commerce and Investment Promotion Institute (IPIM) and the China International Contractors Association (CHINCA). At the event, MBAM representatives met up with Madam Yu Xiaohong, CHINCA Vice Chairwoman and Mr Xin Xiuming, Vice Chairman.
On 11 June 2025, I gave a presentation on Malaysia Current and Future Infrastructure Landscape. He highlighted on the following projects in his presentation: ECRL, Penang LRT, Data Centres business in Malaysia, Upper Padas hydroelectric dam in Sarawak and RTS link between Johor Bharu city and Singapore.
On 12 June 2025, I presented at the 2nd International Infrastructure Project Dispute Resolution and Legal Service Forum. MBAM shared a 60-year journey of how Alternative Dispute Resolution (ADR) has progressed and evolved within Malaysia’s construction industry.
The Malaysian construction industry is highly prone to disputes, primarily due to misaligned expectations, often stemming from contract terms that heavily favour the party awarding the contract. Historically, standard form contracts like PAM/ISM and PWD were adapted from English models, but the private sector frequently introduced bespoke amendments to protect employer interests, often at the contractor’s risk. Before the Construction Industry Payment and Adjudication Act (CIPAA) 2012, conditional payment clauses like “pay when paid” were common, and court litigation and arbitration were the primary, yet unsatisfactory, dispute resolution methods due to their prolonged nature and frequent delays.
Also, on 12 June 2025, I addressed the Forum for Chairmen of International Associations on how to leverage organizational strengths to promote international infrastructure connectivity, using Malaysia’s construction success as a case study. He highlighted that projects like the East Coast Rail Link and Tun Razak Exchange are vital for national progress.
He identified opportunities in regional integration such Johor-Singapore Rapid Transit System, advanced technologies like AI, and inclusive growth through rural-urban connectivity.
Regarding a Joint Action Plan for Enhanced Cooperation, MBAM presented on Malaysia’s experience with the Belt and Road Initiative encompassing:
- Stronger Ties: Emphasize joint ventures that blend local priorities with global expertise, like the Malaysia-China East Coast Rail Link.
- Aligned Standards: Advocate for global standards and joint certifications, similar to Malaysia’s Construction Industry Development Board’s role in ensuring quality and safety.
- Innovative Financing: Promote transparent models and tools like green bonds to attract foreign investment, citing the Asian Infrastructure Investment Bank as an example of pooled funding.
- Knowledge and Technology Transfer: Prioritize joint labs and training, drawing from Malaysia-China BRI plans, to boost local skills.
- Green Initiatives: Make sustainability a core pillar, sharing eco-friendly practices across borders, aligning with the BRI’s Green Development Coalition.
At the Roundtable for Chairmen of International Associations, I had the opportunity to meet up with the Chairman of CHINCA, Mr Fang Qiuchen and the President of International Contractors Association of Korea (ICAK), Mr Han Man-Hee. ICAK has a similar mission as CHINCA for the Korean Contractors operating overseas. ICAK wish to collaborate with MBAM, similar with what CHINCA does. There was also a meeting with representatives of Liugong.
COMPLETION OF MBAM NEW BUILDING AND CENTRE OF EXCELLENCE IN PUTRA HEIGHTS
MBAM the leading voice of the Malaysian construction industry, marked a significant milestone with the completion of MBAM new building in Persiaran Harmoni, Putra Heights, Selangor. This 15,000 square feet foot build-up project underscores MBAM’s commitment to fostering professionalism, innovation, and growth within the construction sector while contributing to the vibrant development of Putra Heights as a commercial hub. This new building (RM9.5 million building only and RM7 million land cost approximately RM16.5 million total) which we are using to host this year’s 71st AGM on 25 June 2025 will be used to provide training to our members, provide mediation services in collaboration with CIDB and will serve as our new office for MBAM Secretariat. The MBAM Centre of Excellence aims to be a hub of academic excellence, fostering collaboration with industry players for the construction industry. Our vision is not only to create a physical space for education but to establish an environment that nurtures creativity, critical thinking, and leadership skills essential for success in the dynamic construction business landscape.
MBAM has commenced operations at its new premise at Bangunan Persatuan Kontraktor Binaan Malaysia (MBAM), Lot 92404, Persiaran Harmoni, Putra Heights, 47650 Subang Jaya, Selangor Darul Ehsan with effect from 16 June 2025.
Looking forward to seeing our members in our new home!
Yours faithfully,
Oliver HC Wee AMN KMN
President, MBAM