FMM calls for delay of service tax for logistics

FMM president Tan Sri Soh Thian Lai.

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has called for the deferment of the service tax for logistics services pending further study to reduce the impact on manufacturers and the public.

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.

Under Budget 2024, the government announced the increase in service tax from 6% to 8% for taxable services (excluding food and beverage, telecommunications and the provision of parking spaces) and the expansion of the scope to include logistics services (beyond forwarding agents, couriers, air transport and warehousing) at the rate of 6%, effective March 1, 2024.

“We understand that the Finance Ministry 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,” Soh said.

FMM has recommended that the B2B tax bubble accorded to logistics service providers be extended to the services and manufacturing sectors, 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.

“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.

“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. — Bernama