Restaurants only subjected to services tax when annual turnover hits RM1m

PETALING JAYA: While the annual turnover threshold for the 6% services tax has been set at RM500,000, Finance Minister Lim Guan Eng said restaurants across the country will only be subjected to the tax when their turnover hits RM1 million.

“The government understands that the Malaysian people like to enjoy roti canai, nasi goreng, char kuey teow, milo ais and a variety of dishes with their family and friends outside,” he said during the tabling of the Services Tax Bill for the second reading in Dewan Rakyat yesterday.

Lim said the RM500,000 threshold is for standardisation purpose and to make sure that small services providers are not overly burdened.

There is no threshold set for the issuance of credit cards and charge cards as well as the electricity supply to domestic users, but the services tax applies to monthly usage of over 600 units.

For hotel services, the scope will be expanded to include bed and breakfast, shared accommodation, serviced apartment and homestay.

Other services that are subjected to the 6% services tax include number forecast activity, casinos, clubs, lottery and horse racing; services that are provided by night clubs, personal clubs and golf clubs; all kinds of telecommunication services including add-on services; flights and charter flights including helicopters.

Lim noted that only 43.5% of services will be subjected to the services tax at the 6% rate, lower than 64.8% of services that were taxed under the goods and services tax (GST) regime.

“This clearly shows that the sales and services tax (SST) pressure on the people is lower than the GST, especially the services tax,” he said, adding that the higher threshold under the SST regime will reduce price pressure and strengthen the consumers’ purchasing power.

Lim reiterated that the SST will only be applied to 38% of the consumer price index basket of goods as compared with 60% of items under the GST.

According to the Customs, a total of 5,443 goods and services are not subjected to the SST, while only 545 items are GST-exempted.

“In other words, the number of goods and services that are not subjected to the SST are 10 times higher than GST period.”

He said the model and scope of the new services tax is based on the Services Tax Act 1975, which was revoked in tandem with the GST implementation in 2014.