KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has called for the deferment of service tax for logistics services pending further study to reduce the impact on manufacturers and the people.
FMM president Tan Sri Soh Thian Lai said in a statement that it views with concern the hike in the service tax especially on logistics services which is burdensome as it would impact all services along the logistics supply chain.
Budget 2024 announced the increase in the service tax rate from six per cent to eight per cent for taxable services (excluding food and beverages services, telecommunications services and provision of parking spaces services) and the expansion of the scope to include logistics services (beyond forwarding agent, courier, air transport and warehousing) at the rate of six per cent effective March 1, 2024.
"We understand that the Ministry of Finance (MoF) is considering providing business-to-business (B2B) tax exemption for service providers providing similar logistics services to ensure no taxes are levied among themselves but only to the final consumer,” he said.
FMM has recommended that the (B2B) tax bubble accorded to logistics service providers be extended to the services sector and manufacturing sector so that any business with a sales and service tax (SST) licence number is not charged sales or service tax.
"This will mean only the wholesale, retail and final consumer or non-registered SST business will pay the SST,” he explained.
"We understand our recommendations will require further study and amendments to be made to the law such as bridging the Sales Tax and Service Tax Acts and Regulations or developing supplementary legislation to support the B2B tax exemption between manufacturers and service providers,” he added.
In this regard, FMM requested for the service tax on logistics services be deferred to further study the exemption mechanism to help manufacturers reduce the tax burden.
"Considering that the service tax on logistics impacts not only manufacturing operations but its entire supply chain, we appreciate if the government could further consult with the industry to resolve all the concerns and introduce an effective exemption mechanism before the implementation of the taxation is finalised,” he said.
Soh said FMM was informed that the government is considering providing an exemption of the logistics service tax only for exports following its engagement session with the MoF on Dec 5, 2023.
"While we welcome this proposal to provide an exemption for exports, it is important for the service tax exemption to be granted for all trade transactions including imports due to the nature of manufacturing and trade as well as the availability of material sources,” he added. - Bernama
