Dewan Rakyat passes the Service Tax Bill 2018

By P PREM KUMAR & DASHVEENJIT KAUR / Graphic By TMR

The Service Tax Bill 2018 was approved in the Dewan Rakyat yesterday which will enforce a 6% tax on all service providers with an annual revenue threshold of RM500,000 and above.

Restaurants were given special consideration with the tax enforceable on establishments with an annual sales of RM1 million and above. Food trucks and food caterings are also included in the consideration.

Finance Minister Lim Guan Eng said only 43.5% of the basket of services will be charged the service tax at 6%, lower than 64.8% which was liable to pay the Goods and Services Tax (GST).

“This clearly shows the tax burden of the Sales and Services Tax (SST) on people, especially service tax, is lighter than the burden brought by the GST,” he told the Dewan Rakyat when winding up debates on the Service Tax Bill yesterday.

Lim said the upon enforcement in September 2018, development projects undertaken by state governments and local authorities nationwide, will be exempted from the service tax — as part of the Sales and Services Tax (SST) — which will replace the GST.

“GST was imposed on all state government and local government’s development projects including road and drain constructions, without any exemptions.

“But with the abolishment of GST, the state governments and local authorities will be saving 6% in the development expenditure which means more can be done for the people,” he said.

According to Lim, SST will also be made applicable on electricity supply to domestic consumers for the usage exceeding 600 units per month, a welcome news for most households in the country.

This was in contrast with GST, which was enforced on domestic users above 300 units per month.

Lim said the special consideration to restaurants will only involve 7,000 businesses nationwide, almost half the 13,000 restaurants covered under GST.

“This will enable the restaurants to maintain or reduce prices of food, which will benefit the people,” he stressed.

The new service tax has expanded its scope compared to the now-disbanded Service Tax Act 1975.

The definition of “hotel” has been expanded to include bed and breakfast, shared accommodation, serviced apartment and homestay — including home-sharing platform Airbnb.

Insurance and takaful services to businesses have been expanded to cover general insurance coverage offered to individuals.

“This extension does not cover medical insurance in line with the service tax exemption on health services,” said Lim.

Vehicle rental service covers all vehicles including those registered under the Tourism Vehicle Licensing Act 1999 and will be liable to SST.

The service tax will be applicable for all types of services offered at night clubs, private clubs and golf or leisure clubs, as well as all telecommunications services including add-on services such as apps and games inside online packages, Internet and paid-television services (satellite and Internet).

New services to be applied with the 6% service tax include gambling activities consisting of numbers forecasts, casinos, clubs, sweepstakes and horse racing as well as domestic flights including helicopter services.

“The service tax will, however, not including services under Rural Air Service in Sabah and Sarawak,” Lim explained.

Room and board charges imposed by private hospitals, which was previously liable to 6% service tax, will no longer be charged service tax under the new SST system.

“This means the whole health service offered by private hospitals is free from consumerism tax,” he said.