Expert: Widening of service tax exemption scope for logistics sector a good sign

Welcome news: The government said it will widen the scope of tax exemption for the logistics sector. — Bloomberg

PETALING JAYA: The widening of the 6% service tax exemption scope for the logistics sector is vital for Malaysia’s vision of becoming the Asean transshipment hub, opined Datuk Seri Dr Michael Tio.

The PKT Logistics Group Sdn Bhd group chief executive officersaid in order to achieve this, it is imperative for the country to benchmark against Singapore.

“We have to look at transshipment cargo because Malaysia is envisioning itself as the next Asean hub.

“If we want to achieve this, we have to pit ourselves against Singapore because they have no such tax charges.

“And to compete with our neighbour, cargos not related to Malaysia, like transshipment cargo and licenced warehouse manufacture, that are operating in the country for export manufacturing should be exempted,” he said in response to the government’s announcement on Monday.

The government said it will widen the scope of tax exemption for the logistics sector, especially for business-to-business (B2B) transactions, after receiving feedback and views submitted by various parties, including MPs.

This is to reduce the incidence of double taxation or the cascading effect of the imposition of tax on several layers of the logistics supply chain, the MOF added.

Tio said the move by the government presents a clearer path as the government is not charging those not related to Malaysia.

Should the government start charging taxes for in-and-out transshipment cargo, Malaysia will lose out to its neighbouring country, he pointed out.

As such, Tio said the move was a good sign that the government listened to the industry by coming up with corrective measures for Sales and Service Tax (SST) for logistics.

“Basically, logistics is a very big industry in transportation, warehousing and handling. So, some freight forwarding agents may outsource their services, from shipping to freight to transportation, to other parties.

“For example, we are being charged the SST, and on top of that, we charge another SST; this is called the doubling impact.

“So, now the government has come up with a mechanism to address this problem of double taxing. But it could also be multi-layer taxing taking place, depending on the layer of services,” Tio said.

However, Peninsular Malaysia Logistics Entrepreneur Association Dr Puvaneaish Subramanian clarified that the SST was still applicable for those whose annual income is RM500,000 and above.

The threshold for the SST does not give any leverage to the bigger players in the industry, with many opting for those with below RM500,000 in annual income, thus creating internal competition, she said.

“While we are happy with the exemption, the guidelines are still unclear on what B2B means in terms of the transport sector, import of cargo, or export. At present, exports are exempt from SST, but what about imports?

“You see, what happens with imports is that eventually they will be borne by the consumer via price increases. Everything is going to increase, including logistics costs, especially for imports,” she said.

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