The ministry said the expanded scope will reduce cascading tax in the sector and alleviate the direct impact on the people’s costs of living.
Under the new scope, logistics service providers such as freight forwarders, shipping, aviation, or cold chain services are no longer required to incur service tax for delivery, distribution or transporting services, which were previously listed as a separate taxable item.
“The government aims to mitigate the tax’s effect on the rakyat’s costs of living, and at the same time, maintain the competitiveness of the nation’s services sector.
“To further preserve the country’s competitiveness, the government will also not impose service tax in free zones,” said second finance minister Amir Hamzah Azizan in a statement today.
The ministry also said that all logistics services provided in or between special and designated areas are not subject to service tax, except for customs agent services which remain taxable.
“With that, free commercial and free industrial zones such as the Port Klang Free Zone and Westports in Selangor, as well as the Pasir Gudang Port in Johor, shall benefit from this exemption,” it said.
The ministry said that the exemptions also apply to maintenance services for repairs of residential buildings; sinking funds and maintenance services related to land or buildings for residential purposes provided by developers, joint management bodies, or resident associations.
“With this, all maintenance and repair services at residential premises such as roof upgrades or for any item and fixture attached to or part of a residential premises’ structure such as lifts, air conditioners, and water heaters are not subject to service tax,” the ministry said.
The ministry emphasised that the increase of the service tax rate from 6% to 8% that came into effect on March 1 is concentrated on services that are discretionary in nature and business-to-business activities that do not directly impact the people.
The increase does not involve key essential services such as food and beverages, telecommunications and vehicle parking, it added.