Putrajaya says 10% service charge to stay

Customers at restaurants and hotels will continue to pay the 10% service charge despite the government having previously stated that the implementation of 6% GST would replace the combined government tax and service charge of 15%. – The Malaysian Insider file pic, April 22, 2015.Putrajaya announced today that businesses such as hotels and restaurants, can continue to collect the 10% service charge from consumers, ending confusion as to whether the fee was still allowed after the implementation of goods and services tax (GST).

Domestic Trade, Cooperative and Consumerism Ministry secretary-general Datuk Seri Alias Ahmad said after meeting with the stakeholders over the matter, the government decided to retain the practice, which was different from GST.

The decision, he said was also made to protect the workers in the industry.

However, he said hoteliers and restaurant owners are advised to display a notice informing consumer on the service charge imposed at their outlets.

Alias said although the government acknowledged the complaints from consumers, the decision had to be made because many of the workers are still earning salary as low as RM350.

"Looking at reports we get from the consumers, many disagree with the service charge imposed.

"Based on the reasons above, however, the government maintains that businesses can continue to collect service charge," he told reporters in Putrajaya today. 

Alias said that the decision was made on Monday, after holding 18 discussions with the unions, associations representing restaurants, hotels, franchise holders, and related government agencies.

The service charge, he added, may only be imposed if there was a collective agreement (CA) between the employer and the workers.

"Workers' incomes are low and the service charges are used to cover the gap." he said.

Since the GST was implemented on April 1, there has been confusion among various service-providers and consumers as to whether the service charge, which is different from the sales and service tax that the GST replaces, should be retained.

Operators and employers have recently said that the charge of between 5% and 10% was important, as it was divided and shared among their workers.

Hoteliers and food and beverage operators, especially, said that the service charge was necessary to meet the minimum wage for their workers.

The uproar led the ministry to call for a meeting with hotel associations and restaurant owners to discuss the matter.

- TMI