The government has unexpectedly decided to expand the scope of the sales and service tax (SST) to include almost all types of maintenance and repair (M&R) jobs. This comes just a few days before the SST is slated to be increased from 6% to 8% starting from 1 March 2024, as announced under Budget 2024.

This latest update was revealed in a federal government gazette on an amendment to the service tax regulation, published late last week on website of the Attorney General’s Chambers. The document also noted that this new arrangement was to start from 26 February 2024, along with the implementation of the SST on several other new taxable services, namely logistics, brokerage, underwriting, and karaoke services.

Unlike the surprise inclusion of M&R services, however, the government had already previously announced that it will be expanding the scope of taxable services to include these four industries. The document does add, though, that some logistics services will also be exempted from the SST, namely those involving export, import, goods in transit, and F&B by eateries and caterers (including those operating via e-commerce platforms).

Meanwhile, executive director of independent tax advisory firm TRATAX Sdn Bhd, Thenesh Kannaa highlighted that for M&R services, the implementation of the SST will be quite broad. It will be imposed on all M&R services, with only two exceptions: services related to the maintenance of residential buildings and M&R services of joint management corporations (JMCs).

Given the broad-stroke implementation of the SST on M&R services, Kannaa said that the public can expect a “wide impact”. He shared that the SST was previously only imposed on selected M&R services, including motor repair and ad hoc maintenance work on assets covered under a maintenance management contract. “Now, if you call someone to service your air conditioner, that is going to be subject to service tax,” he further stated.

Senior executive director at Grant Thornton, Alan Chung also weighed in on the matter, stating that the government’s surprise move has left the public ill-prepared for it. He highlighted several other concerns as well, one of which is the treatment of the terms “maintenance” and “repair”.

“Maintenance and repair are very broad terms, it doesn’t just cover air conditioning systems and elevators, it covers laptops too, everything’s in there. If your television is sent for repairs, it is subject to services tax. The coverage is very wide, that’s one perspective of it,” said Chung, adding that there may be other issues like double taxation and cascading taxes as well.

Chung also shared that the tax industry is already reaching out to the Finance Ministry and the Royal Malaysian Customs Department to obtain further clarification on the matter. He hopes that an amenable solution can proposed soon.

(Source: The Edge Malaysia [1, 2])

• TAGS:
• Alan Chung
• Attorney General’s Chambers
• Grant Thornton
• Maintenance & Repair Jobs
• Sales and Service Tax
• SST
• SST Exemption
• Thenesh Kannaa
• TRATAX Sdn Bhd