Recent Changes in Sales & Service Tax

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The Government of Malaysia has recently enacted the changes in Sales and Service Tax in Malaysia. Below please find a summary of the changes:
       

Increase in Service Tax rate from 6 % to 8 %

Effective 1 March 2024, the Service Tax rate for all taxable services will be increased from 6 percent to 8 percent, except for the following services:

  • Provision of food and beverages services;
  • Telecommunications services;
  • Provision of parking place services.
     

Imposition of Service Tax on New Taxable Services

The following services were included as taxable services effective from 26 February 2024:
    
Taxable Service
​Service Tax Rate
​Karaoke Center
​8 %
​Maintenance or repair services
​8 %
​Brokerage or underwriting services other than those relating to financial services
​8 %
​Logistics services
​6 %

 We will elaborate further on some of these services below.
      

New taxable service – Logistics services

The following services are included under the new logistics services (Group J):

Logistics services including all or part of the supply chain of logistic management services, warehousing or warehousing management services, freight forwarding services, port or airport services, shipping services, aviation services or cold chain facilities services are treated as taxable services under this group.
    
Taxable services under this group also include delivery, distribution or transportation of goods services and services for the release of goods from customs control as well as courier services of documents, packages or goods through the e-commerce platform including on behalf of any person.

However, they exclude the following services:

  • delivery, distribution or transportation of goods (including courier services of documents, packages or goods) which:
  • are from a place outside Malaysia to a place outside Malaysia;
  • are from the last point of exit within Malaysia to a place outside Malaysia;
  • are from a place outside Malaysia to the first point of entry within Malaysia;
  • arrive at the Malaysian customs port or airport for the purposes of transfer or unloading from an aircraft or vessel to another aircraft or vessel or a customs warehouse, or a licensed warehouse, or a warehouse or other places approved by the Director General until the goods are transported in the aircraft or vessel and transported out of Malaysia.       
  • delivery of food and beverages provided by a taxable person under Group B (Food & Beverage)

     

The following services which were previously under other groups have been categorised under this new
 Group J:


  • Maintenance management services;
  • Warehousing management services; 
  • Services for clearing of goods from customs control by customs agent; 
  • Courier delivery services for documents or parcels not exceeding 30 kilograms each. 
      
B2B exemption is available where both the service provider and its recipient are registered for service tax under the same group of service and provide the same service.
           

New taxable service – Maintenance or repair services

Maintenance and repair services have been included as a new taxable service under Group G (Professionals or Skills) and are subject to Service Tax at 8 percent, effective as of 26 February 2024. 
     
The taxable services under this new item include maintenance management, corrective maintenance, preventive maintenance, calibration, adjustment, recondition, reconfigure or overhaul but exclude the following:

  • Maintenance management services related to land or building for residential use provided by any developer, joint management body, management corporation or residential association;
  • Repair services on the residential building.

Transitional considerations

Generally, taxable services provided before 1 March 2024 are taxable at 6 percent, while taxable services provided on or after 1 March 2024 will be taxable at 8 percent (except for services which remain taxable at 6 percent). For taxable services that span before and after 1 March 2024, the applicable service tax rate should be apportioned based on the period in which the taxable services are provided.
     
For any payment received before 1 March 2024 (for taxable services to be provided on or after 1 March 2024), the Service Tax rate of 6 percent can still be applied. 
      

Key takeaway for taxpayers: 

If the taxable person provides the new taxable services and has reached the threshold on the effective date, they should register before March 31, 2024 and calculate SST from April 1, 2024. The taxable person should also consider the available B2B exemptions to avoid double taxation.
     
If you need any clarification or assistance, please do not hesitate to contact us, and we will be happy to support.

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