KUALA LUMPUR, Feb 29 — The increase in the Service Tax rate from 6.0 per cent to 8.0 per cent, effective from March 1, 2024, only affects discretionary services activities and business-to-business (B2B) activities, according to the Ministry of Finance (MOF).
Minister of Finance II, Datuk Seri Amir Hamzah Azizan, said the specification is to ensure that the people are not burdened with higher consumption tax rates, especially in terms of essential services such as food and beverages, parking, telecommunications and logistics.
“To ensure a successful economic transformation, the government is taking a cautious approach to reforming the national tax system.
“Despite the need to increase national revenue, the government must take into account the need to protect the people from excessive burdens,” he said in a statement on Wednesday.
He said the government needs to broaden the tax base to strengthen the country’s fiscal base to ensure more sustainable economic growth as outlined under the MADANI Economic framework.
The new tax system is expected to generate an estimated additional revenue of RM3 billion for the country, which can be used to improve targeted assistance to the people and increase the upgrades and maintenance of critical public infrastructure such as healthcare, schools, and roads.
According to the MOF, the increase in the Service Tax rate does not involve services that are basic necessities and part of the people’s lifestyle.
For example, services widely used by the people such as food and beverages, telecommunications and parking remain subject to a service tax rate of 6.0 percent.
As for electricity services, the Service Tax is only imposed on usage exceeding 600 kilowatt hour (kWh), and nearly 85 per cent of electricity consumers in the country are below this threshold and thus are not affected.
The Service Tax will also not be imposed on treated water services.
