KUALA LUMPUR – The service tax’s hike from 6% to 8%, effective today, will see consumers paying more for selected services, although the government has said the change will not lead to an economic shock as essentials such as food and telecommunications services will not be affected.
While the service tax increments are straightforward for most service sectors, in some cases, the calculations might be a bit more intricate.
For now, the types of services which are safe from the 8% service tax are:
Exemptions
Consumers can eat in peace as the tax increment will not apply to services deemed basic and essential to the people, such as the food and beverage sector, and this applies to restaurants, cafes, and bars, as well as food delivery services.
The exemption also applies to bills for treated water supply, as well as telecommunications and parking services.
Those who use less than 600kWh of electricity a month, or whose monthly bill is less than RM220, will also not be affected by the higher tax.
Meanwhile, credit and charge card services remain at RM25 per annum.
Logistics, a newly-included service sector, also enjoys tax at 6%. Services include customs agents, e-commerce, delivery and distribution services.
A closer look at electricity bills
While those with bills of less than RM220 per month or equivalent to a usage below 600 kWh will continue to pay 6% service tax, any amount used above that will be taxed 8%.
The Finance Ministry has assured that almost 85% of electricity users are below the RM220 per month threshold, and would not be affected by the tax increment.
Therefore, if a household’s electricity bill amounts to RM260, the 8% tax of RM3.20 is applied to the additional RM40 of electricity used. The total bill becomes RM263.20.
Lifestyle, recreational spending affected
Other consumer activities affected by the two percentage point increase are those deemed non-essential.
The more common ones are:
Hotel stays
Establishments providing accommodation, such as hotels, serviced apartments, and motels, will all have to charge guests the 8% service tax.
Consumers on a budget who still want a staycation in the city can expect to pay service tax of RM27.12 for a short-term rental accommodation in Bukit Bintang priced at RM339 per night, for example, making the total RM366.12.
Entertainment and wellness
The same tax increment also applies when going for a night out at nightclubs, dance halls, cabarets, or when in need for a massage or spa treatment.
For example, a typical hour-long traditional Thai massage in a commercial massage parlour priced at RM138 would now be RM149.04 after the 8% service tax, as opposed to RM146.28 when the tax was 6%.
General admission fees to nightclubs charging RM50 per person will cost RM54 (8%), instead of RM53 (6%).
Karaoke lovers can sing their hearts out about being out of love – and budget – as the service is now also taxable at 8%.
Private clubs also fall into the increased tax charges, including clubhouses based on membership, profession, or class.
Golf and gambling
Golfers must now fork out more funds to enjoy their favourite sport, as the tax increase applies to golf clubs and driving ranges.
Gambling centres must now charge 8% in service tax for activities including betting, lottery, slot machines, and any games of chance.
Professional services
Those seeking services in legal, accountancy, valuation, engineering, design, consultancy, training, IT, and digital services will also have to pay 8% in service tax.
Management services, including maintenance and repair work, warehousing, collection and debt, sports facilities, and secretarial works are also subject to the higher tax.
For vehicle repair and maintenance, services such as wheel alignment and balancing would be affected by the two-percent increment.
This also applies to employment and security services.
Firms offering insurance and takaful services, customs agents, motor vehicle services, courier, rental and tour vehicles, advertising, and cleaning now come with an 8% service tax.
Newly added services which fall under this bracket include brokerage and underwriting services, with an upward extension to non-financial services such as ships, aircraft, commodities, and real estate.
What comes after the tax?
Some consumer groups have underscored the need for financial literacy following the tax increments.
Datuk Paul Selvaraj, secretary-general of the Federation of Malaysian Consumers Association, told Scoop that the government must ensure that Malaysians, especially from the lower income bracket, are educated on financial management.
“There isn’t enough education on financial literacy although there are some programmes.
“People also need to be educated about the purpose of collecting tax, but at the same time, the government must also improve the quality of public services. If not, why should people pay more tax?” he said. – March 1, 2024