Tax hike on certain services, essentials unaffected - minister

The upcoming service tax hike only affects discretionary services and business-to-business (B2B) activities, said Finance Minister II Amir Hamzah Azizan.

He said the specification is to ensure people are not burdened with higher consumption tax rates, especially for essential services such as food and beverage, parking, telecommunications, and logistics.

“To ensure a successful economic transformation, the government is taking a cautious approach to reforming the national tax system.

“Despite the need to increase national revenue, the government must take into account the need to protect the people from excessive burdens,” Amir (above) said in a statement issued by the Finance Ministry today.

He said the government needs to broaden the tax base to strengthen the country’s finances to ensure sustainable economic growth as outlined under the Madani Economic framework.

“At the same time, the government is making every effort to realign the trajectory of the national economy, including practising prudent spending, reducing wastage, and attracting foreign direct investment (FDI),” he added.

The new tax system is expected to generate additional revenue of about RM3 billion for the country, which can be used to improve targeted assistance to the people and increase the upgrades and maintenance of critical public infrastructure such as healthcare, schools, and roads.

According to the ministry, the increase in the service tax rate does not involve services that are necessities and part of the people’s lifestyle.

For example, services widely used by the people such as food and beverages, telecommunications, and parking remain subject to a service tax rate of 6.0 percent.

As for electricity services, the service tax is only imposed on usage exceeding 600 kWh, and nearly 85 percent of electricity consumers in the country are below this threshold and thus are not affected.

The service tax will also not be imposed on treated water services.

The full list of taxable services and frequently asked questions (FAQs) can be found on the Finance Ministry’s website here.

- Bernama