Finance Minister says only 43.5pct of services subject to SST


  • Business
  • Wednesday, 08 Aug 2018

Finance Minister Lim Guan Eng said the model and scope of the proposed tax would be implemented based on the Service Tax Act 1975. Bernama file pic

KUALA LUMPUR: Only 43.5 per cent of services will be subject to the Sales and Services Tax (SST) come Sept 1, compared with the 64.8 per cent of services which were subjected to the Goods and Services Tax (GST).

During the second reading of the proposed Service Tax Bill 2018 in Parliament today, Finance Minister Lim Guan Eng said the model and scope of the proposed tax would be implemented based on the Service Tax Act 1975, which was repealed following the introduction of the GST in 2014.

However, he noted that the existing model and scope needed to be improved in several areas to facilitate tax administration, reduce business operating costs and address weaknesses in the tax system.

The improvements include standardising the sales threshold for service tax registration purposes to RM500,000 annually for all taxable services.

Meanwhile, as for services in restaurants throughout the nation, Lim said the government would be flexible and has proposed for the SST to be imposed on restaurants with an annual turnover of RM1 million.

On improvements to the scope of the Service Tax, he said the variety of tax services contradicted the transparency principle and could become a loophole which could be manipulated for tax evasion purposes, in addition to complicating tax administration processes.

As such, he proposed several improvements and for several types of taxable services to be standardised.

This includes expanding the scope of hotel accommodation services to include bed and breakfast (B and B), shared accommodations, serviced apartments and homestays.

Meanwhile, the scope for restaurant services would include catering, takeaways, food trucks and provision of food and beverage at retail outlets, while the scope for insurance and takaful services to businesses would include general insurance coverage for individuals, excluding medical insurance.  

Additionally, the scope of the tax would also be expanded to include all services in nightclubs, private clubs, golf and driving range clubs, car rentals and all types of telecommunication services.

Several new types of service would also be subject to the six per cent tax such as gambling activities which includes betting, casinos, clubs, lotteries and horse racing; domestic flights and chartered flight services (including helicopters) as well as information technology services.

Additionally, the service tax rate for credit and charge cards would be subjected to a specific rate of RM25 annually for both main and supplementary cards.

Lim also said that the contra system facility under the earlier tax system would be maintained.

Under the facility, the service provider can refuse to pay the service tax in the account statement for cancelled or terminated services or for other reasons such as to reduce premiums or discounts.

Following the tax reduction, Lim said the Federal government hoped that the nation's wealth could be shared more widely among the people, especially among the poor and the middle-class.

He added that the number of goods and services not subjected to the SST was 10 times more, and RM17 billion which was expected to be collected would be returned by the Federal government to the people this year through the change in this tax system. - Bernama

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