The proposal to retain the six percent service tax for domestic flights will be discussed in this week's cabinet meeting, said Transport Minister Anthony Loke.
The Transport Ministry will discuss with the Finance Ministry regarding the matter since the tax issue falls under the latter’s jurisdiction, he added.
“Service tax applies to air tickets. I will discuss with the Finance Ministry to see whether we can maintain that tax at six percent for domestic travels," he told the media after launching AirAsia fixed fares in conjunction with Hari Raya Aidilfitri today.
Loke said the matter will be brought up for discussion in the cabinet meeting expected to be held this Friday.
Service tax was increased to eight percent effective March 1 compared to the previous six percent.
However, the new rates do not include services for food and beverages, telecommunications and parking.
The increase was announced in the tabling of Budget 2024 last October which is part of the government's efforts to increase the country's financial resilience while reducing the budget deficit.
Maintaining tax will help tourism
Capital A chief executive officer Tony Fernandes said maintaining the service tax at six percent for domestic travel should be considered as the industry has just recovered post-Covid-19 and tourism plays a big part in the country's economy.
The government should also look at maintenance, repair and overhaul (MRO) organisations as it would become a huge business, he added.
He hoped the government would support the local MRO organisations in their efforts to catch up with Singapore.
"MRO can be a very big job creator in this part of the world. We hope that apart from the service tax, the government will look at MRO organisations that are big employers and contributors to the gross domestic product," he said.
In conjunction with Hari Raya Aidilfitri, AirAsia is offering more than 22,000 seats at fixed low fares for late night flights between the peninsula and Sabah and Sarawak.
The fare is fixed at RM298 one way to Sarawak while to Sabah it is RM348 one way.
The promotional fare can be booked from today until April 17 on the AirAsia website and the AirAsia Move app.
- Bernama
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