The amendment
The Minister of Finance of Malaysia has set the service tax rate to be increased from 6% to 8% from 01 March 2024 on all existing taxable services except:
a) food and beverage services;
b) telecommunication services; and
c) parking space provision service.
The above service tax rate shall remain at the rate of 6% and for credit cards and fixed charge cards is charged at RM25/year.
Furthermore, the Minister of Finance also has expanded the scope of new taxable services effective from 01 March 2024. The new taxable services and tax rates are as follows:
a) karaoke center services under Group C at a rate of 8%;
b) maintenance and/or repair services under Group G (Item 13) at a rate of 8%;
c) brokerage and underwriting services for services other than financial under Group I (Item 12) at a rate of 8%; and
d) logistics services under Group J (New Details) at a rate of 6%
General concept of transitional rate period
Determination of service tax rate for taxable services which provided must be based on the date the service is provided. If the taxable service is provided in full before the effective date of the tax rate change, the taxable service is charged at the old rate. In case the taxable service is fully provided on/after the effective date of the tax rate change, the taxable service is charged at the new rate.
If taxable services are provided before the effective date of the tax rate change and beyond the effective date of the tax rate change, the service tax rate is applied apportionment as follows:
a) taxable services provided before the effective date of the tax rate change are subject to service tax at the old rate; and
b) taxable services provided on/after the effective date of the tax rate change are subject to service tax at the new rate.
However, regardless of the tax accounting basis services of registered persons whether on a fee basis or invoice basis, any payment received before the effective date of the tax rate change in relation to any service provided on/after the effective date of the tax rate change, such payment is subject to the old rate.
For betting and gambling services, any payment received by the service provider whether in the form of money, chips, coupons or other forms includes free chips or free coupons for taxable betting and gambling services provided on/after the effective date of the tax rate change, taxable services are subject to service tax at the current rate when service tax becomes due and payable.
The change in the service tax rate to 8% instead of 6% effective from 1.3.2024 affects the determination of the tax rate which involves a transition period. The determination of the service tax rate for taxable services provided shall be based on the date the service is provided. However, regardless of the registered person’s service tax accounting basis, whether payment basis or invoice basis, any payment received before 1.3.2024 in relation to any service provided on/after 1.3.2024, the payment is subject to the rate of 6 %. As a summary of the mentioned:
In the scenario of a tax rate change from 6% to 8% effective from March 1, 2024:
a) Services fully provided before March 1, 2024, are taxed at 6%.
b) Services fully provided on or after March 1, 2024, are taxed at 8%.
c) Payments received before March 1, 2024, for services provided after this date are subject to the 6% rate.