Service Tax Malaysia: Two Major Changes in 2024
17 May 2024
Malaysia’s fiscal landscape is undergoing significant changes with the announcement of the 2024 Budget, including a notable increase in the service tax rate. This shift, alongside the reintroduction of the Sales and Service Tax since 2018, reflects the nation’s proactive stance toward economic challenges. The experts at ECOVIS Malaysia outline the changes.
Change in Malaysia’s Service Tax Rate from 6% to 8%
Following the unveiling of Malaysia’s 2024 Budget, that was presented in Parliament on 13 October 2023, numerous taxation reform measures will be implemented in 2024 to broaden the country’s revenue base.
One of the hottest measures among Malaysians is that the service tax rate has been increased from 6% to 8% with effect from 1 March 2024. Sales and Service Tax (SST) has been reintroduced in Malaysia after the country only implemented Goods and Services Tax (GST) between April 2015 and July 2018. This change marks a notable shift in the country’s monetary policy framework, reflecting its response to the prevailing economic conditions and is expected to generate an estimated additional RM3 billion in revenue.
In accordance with subsection 10(2) of the Service Tax Act 2018 (STA 2018) Malaysia, the Ministry of Finance has increased the service tax rates for all existing taxable services except for the following categories which are deemed to be essential services and have been maintained at 6%.
- Food and beverage services,
- Telecommunication services,
- Parking space rental services; and
- Logistic services (newly imposed).
Determination of the Service Tax Rate during the Transitional Period Effect of the Service Tax Rate Change
Due to the change in service tax rate, the Royal Customs Department of Malaysia has issued a guideline to address the transitional period issues. We summarise the scenario below when the taxable services are to be taxed at 6% or 8%.
| Scenario | Service tax rate | |
|---|---|---|
| Before 1.3.2024 | After 1.3.2024 | |
| Taxable services provided Invoice issued Full /partial payment received |
6% |
|
| Invoice issued Full payment received |
Taxable services provided | 6% |
| Taxable services provided Invoice issued Full payment received |
8% |
|
| Invoice issued Partial payment received |
Taxable services provided Balance payment received |
Payment before 1.3.2024 @ 6% Payment after 1.3.2024 @ 8% |
Extending the scope of taxable services
In accordance with section 8 of the STA 2018, the Minister of Finance has extended the scope of new taxable services with effect from 1 March 2024. The new taxable services are as follows:
| Scope | Service tax rate |
| 1. Karaoke centre services; 2. Maintenance and/or repair services; 3. Brokering and guaranteeing services for non-financial services |
8% |
| 4. Logistic services | 6% |
Given the above two major changes in the 2024, it is likely that the government will gradually consider further expanding the scope of taxable services in the near future. It is unlikely that the government will re-introduce the GST, but in another version of the SST similar to the VAT or GST of other countries.