Shoring up the nation’s indirect tax revenue
THE government had also announced several indirect tax measures to boost tax revenue.
Some of these new taxes include the imposition of sales tax on low value goods.
Of note, currently, sales tax is imposed and levied on all taxable goods manufactured in Malaysia or imported into Malaysia. However, sales tax exemption is given on imported goods not exceeding RM500 (except for cigarettes, tobacco and intoxicating liquor) using air courier services through designated international airports. The exemption is provided under Item 24, Schedule A, Sales Tax (Persons Exempted From Payment Of Tax) Order 2018.
Under the new sales tax, it is proposed that goods not exceeding RM500 from abroad (Low Value Goods - LVG) sold online by seller and delivered to consumers in Malaysia via air courier service is expected to be subjected to a sales tax.
With the imposition of sales tax on LVG, exemption under Item 24, Schedule A, Sales Tax (Persons Exempted From Payment Of Tax) Order 2018 will be revoked.
The imposition of sales tax on LVG is to be implemented through the new provision in Sales Tax Act 2018. Through this provision, sellers from Malaysia or abroad who sell LVG to consumers in Malaysia are required to register and charge sales tax.
This new tax is expected to be effective on January 1, 2023.
Deloitte Malaysia noted that this sales tax on LVG is in line with similar developments in the European Union, Australia, New Zealand and Singapore, albeit under a GST/VAT system. The imposition of sales tax on LVG sold by online merchants would level the playing field between local and foreign sellers.
However, in order to gauge how this could affect foreign sellers and domestic consumers, further details are needed on how the sales tax on LVG would be administered, in particular how foreign sellers are to be registered and the method for collection and payment of the tax.
Tax on courier, delivery services
Service tax on goods delivery services have also been announced under Budget 2022 and this could see service tax is to be charged on all delivery services for goods, by any service provider including e-Commerce platforms.
The delivery of food and beverages as well as logistics services, however, will be excluded from service tax.
Currently, courier delivery services for documents or parcels not exceeding 30 kilogrammes by service providers licensed under Section 10, Postal Services Act 2012 is subject to service tax under Group I, First Schedule of Service Tax Regulations 2018. While the goods delivery services by service providers not licensed under the Postal Services Act 2012 is not subject to service tax.
This service tax is expected to come into effect on July 1, 2022.
Deloitte Malaysia remarked, “The change is intended to ensure equal treatment for all goods delivery services. It is not yet clear what thresholds will be set for registration; however, it is hoped that a sufficiently high threshold be set (RM500,000 and above) to ensure that smaller service providers are not brought into the net and imposed with this additional compliance burden.”
It also noted that currently, express delivery services for documents and parcels not exceeding 30kg by a licensed service provider under the Postal Services Act 2012 are subject to service tax, while unlicensed service providers are not.
“The proposed change would apply service tax to all forms of express delivery services regardless of license.
“The only exceptions are food and beverage delivery services and logistics services. Consequently, the broad range of delivery services including those provided in relation to the purchase of goods through online websites and platforms would be within the scope of the tax,” it added.
On sugar and nicotine tax
In support of a healthy lifestyle, the government proposes to expand the imposition of excise duty on sugar sweetened beverages in the form of pre-mixed preparations of chocolate or cocoa, malt, coffee and tea. The government also plans to impose excise duty on liquid or gel products containing nicotine that are used for electronic cigarettes and vaping.
Currently, beverages in ready-to-drink form are subject to excise duty at the rate of RM0.40 per litre, if they exceed certain threshold values of sugar content.
It is now proposed that excise duty will be imposed on premixed preparations products
categorised under tariff codes 18.06, 19.01 and 21.01 at the rate of RM0.47 per 100g.
“The Government had introduced excise duty on sugary beverage products effective July 1, 2019, as part of its measures to address health issues like diabetes, obesity etc. It has now extended the scope of excise duty to cover pre-mixed preparation products containing sugar, for similar reasons.”
It also proposes to impose an excise duty on liquid or gel products used in electronic cigarettes and vape.
Excise duty will be imposed at the rate of RM1.20 per millilitre. Excise duty for non-nicotine liquid or gel used for electronic cigarettes and vape will be increased from RM0.40 per millilitre to RM1.20 per millilitre similar to excise duty for liquid or gel containing nicotine.