KUALA LUMPUR, Feb 29 — The government’s decision to keep the service tax unchanged at 6 per cent for logistics services will help alleviate the cost impact on businesses and consumers, says Ernst & Young Tax Consultants Sdn Bhd (EY).
EY Malaysia tax managing partner Farah Rosley said the applicability of the business-to-business (B2B) exemption on logistics services has also been crystalised.
“This is a much-welcomed measure granted by the government to the logistics industry to minimise the tax cascading effect within the supply chain,” she said in a statement today.
In the Budget 2024 announcement on Oct 13, 2023, the government proposed to increase the service tax to 8 per cent from 6 per cent for all of the prescribed taxable services from March 1, 2024 (tomorrow), except for food and beverages (F&B), telecommunications, parking and logistics services that include the delivery of goods.
Nevertheless, Farah said it may also be worth considering for the service tax intragroup exemption to be made applicable for logistics services, as there are groups of companies having their own logistics entities that are merely servicing their related parties.
“In such cases where the said exemption would not apply, the additional cost will be incurred by these groups,” she noted.
On repair and maintenance (R&M) services that will be subject to the tax hike, Farah said it is worthwhile to look at the category or type of services that may fall under taxable services, and their impact on businesses as well as end consumers.
“It is noted that maintenance management services provided by specified service providers for land or buildings for residential use, as well as repair services for residential properties, are excluded from being considered as taxable R&M services.
“Further clarity on the interpretation of these exclusions may still be required, such as whether any repair services done for moveable goods within residential premises can qualify as non-taxable R&M services,” she added.
On the new category of taxable service that is grouped under Group G: Professionals or Skills, Farah said the R&M services under this group shall also be eligible for the service tax intragroup exemption.
Furthermore, she said the applicability of the B2B exemption on businesses acquiring similar repair and maintenance services from other businesses, which are eventually onward provided to their end customers, should also be considered to alleviate any tax cascading effect.
“In the effort to increase the government’s revenue and achieve a positive impact on the economy, considerations can be given to the impact of such changes (from the service tax hike), and the availability of exemptions to alleviate any cascading effect to ensure businesses remain competitive,” she said. — Bernama
