The government has announced that it will continue to exempt water bills from the service tax (SST), which is set to increase from the current 6% to 8% come tomorrow (1 March 2024). Additionally, the government clarified that domestic users consuming over 600 kilowatt-hour (kWh) per month will be subjected to a higher tax of 8%.

In a statement, the Ministry of Finance (MOF) emphasised that the implementation of the higher tax for selected domestic electricity users is only expected to affect about 15% of the public. Meanwhile, a majority of domestic users whose monthly electricity consumption is 600kWh and below will continue to be exempted from the SST on their bills.

“Almost 85% of users fall below this threshold [of 600kWh], and therefore will not be affected,” said the ministry in its statement, adding that F&B delivery services, too, will be exempted from the new SST.

Separately, the MOF also shared a clarification on its decision to include maintenance and repair (M&R) jobs in an amendment to the service tax regulation. This came following an unexpected discovery early this week, where a federal government gazette was found to have included the service as one of the new taxable services under the updated scope of the 8% SST. Other services that have also been newly made taxable include brokerage, underwriting, karaoke, and selected logistics services – as noted during the tabling of Budget 2024.

Treasury secretary-general of MOF, Datuk Johan Mahmood Merican explained that the inclusion of M&R services in the list was simply to avoid confusion on the definition of maintenance. He also said that the service tax has always been applicable to maintenance jobs, but was limited only to scheduled and preventive maintenance tasks.

“[Meanwhile,] Repairs and corrective maintenance were not subject to tax. But that brings into question definitive issues. Therefore, now all types of maintenance is covered under the service tax,” said Datuk Johan.

In making these clarifications, the MOF stressed that the updated service tax – with its expanded scope and increased percentage – is necessary to support the government’s ongoing efforts to strengthen the country’s fiscal foundation.

“The expanded tax system is expected to generate an estimated additional RM3 billion in revenue to the country, which will help the Madani government increase its support for the rakyat through better social assistance schemes and improved critical public infrastructure like healthcare, schools, and roads,” said the ministry, adding that the SST hike is not expected to cause sharp price increases that would lead to an economic shock.

(Sources: MOF, New Straits Times)

• TAGS:
• Datuk Johan Mahmood Merican
• Electricity Bills
• Maintenance & Repair Jobs
• Ministry of Finance
• Sales and Service Tax
• SST
• SST Exemption
• Water Bills