Malaysia’s new 8pc service tax rate increases govt coffers without GST comeback, but may up consumers’ costs, tax firms say

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Malaysia’s new 8pc service tax rate increases govt coffers without GST comeback, but may up consumers’ costs, tax firms say
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KUALA LUMPUR, Oct 14 — The Malaysian government will be able to increase its revenue for the country’s spending without bringing back the Goods and Services Tax (GST), by...

People at a stall at the Ashby Road flats watch the tabling of Budget 2024 on television by Prime Minister Datuk Seri Anwar Ibrahim October 13, 2023. — Picture by Farhan NajibKUALA LUMPUR, Oct 14 — The Malaysian government will be able to increase its revenue for the country’s spending without bringing back the Goods and Services Tax , by opting to instead hike the service tax to 8 per cent under Budget 2024, tax advisory firms have said.

“As we all know, the sales and service tax regime has a ‘tax on tax’ effect and will result in higher prices. To cushion this, it is hoped that the government will expand the Business-to-Business Exemptions that is currently applicable to certain prescribed taxable services,” she added.Deloitte Malaysia’s country tax leader Sim Kwang Gek said the service tax rate hike to 8 per cent and widened coverage of taxable services under this tax would broaden Malaysia’s tax base.

“However, we are concerned that increasing the service tax rate and expanding the scope may increase the cost to businesses and impact prices down the supply chain. Thus, we anticipate the government would adopt further indirect tax reforms to increase compliance and widen the tax base,” he also said in Deloitte Malaysia’s Budget 2024 analysis released today.

PwC Malaysia’s tax leader Jagdev Singh said the service tax rate hike seems to be a temporary measure in the absence of a GST-like broad-based consumption tax. “Also, expanding the Service Tax to cover logistics services will have a cascading effect on costs, and businesses will seek to pass these on to consumers in the form of increase in prices of goods and services,” he said.

Ernst & Young Tax Consultants Malaysia Tax Leader Farah Rosley said it was expected that the Malaysian government would not revive GST in the Budget for next year.

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