Service tax may cost logistics sector its competitive edge, says think tank

PETALING JAYA: The recent implementation of 6% service tax on logistics services has caused confusion and apprehension within the industry nationwide, says the Institute of Strategic Analysis and Policy Research (Insap).

"The SST on local freight is a hidden tax hike on consumers which, according to Sabah Freight Forwarders and Logistics Association president Datuk Johnson Dai, is making them victims as it relies heavily on inter-island transportation," Insap chairman Datuk Dr Pamela Yong said in a statement on Thursday (March 14).

"This policy, according to him, undermines the government's goal of a level playing field and risks widening the economic gap between East and West Malaysia."

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She said a recent dialogue with the logistics industry revealed a strong consensus in favour of adopting goods and services tax (GST) over the sales and service tax (SST) model, particularly for port logistics services.

"First of all SST should only be levied outside the terminals, aligning with standard practices worldwide.

"Secondly, SST poses many complications for the logistics industry and will have a compounding effect on the final price of goods for consumers which could be as high as a 30% increment, according to industry players," Yong added.

She said unlike SST, GST does not apply to taxes paid at earlier stages in the supply chain, making it less burdensome on consumers.

Quoting Federation of Malaysia Freight Forwarders (FMFF) president Datuk Dr Tony Chia, the statement said the imposition of 6% SST on logistics services directly contradicted the concept of a free trade zone within port terminals.

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Chia said tax policies for activities within port terminals are zero rated in both Singapore and Thailand.

As such, Yong urged the government to clear up the confusion over the deadline for logistics service providers before the country loses any edge it has in the regional logistics industry.

Insap, established in 1986, is an independent think-tank and research outfit that conducts research and analysis on politics, economics, education, women's rights and development, social and other issues in Malaysia.

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