The Treasury said one key reason the exemption was given was to prevent the owners of aircraft and ships from registering them abroad.

Allowing that to happen would lead to a decrease in economic and tourism activity in Malaysia, it said in a statement.

It said another reason was that other neighbouring countries do not impose a service tax on these leasing services.

“Without the exemption, customers may opt for aircraft and ship leasing services overseas instead,” it said.

The ministry also denied that the exemption was done discreetly, saying an official notification was uploaded on the customs department’s MySST portal on July 24.

“This exemption is specifically for the aviation and maritime industries, which play an important role in the supply chain, tourism, and economy.

“It does not apply to vehicle rentals such as cars, buses, or business premises, which differ in terms of the way they are used,” it added.

The 8% service tax on rental and leasing services, which came into force from July 1, applies to service providers whose rental or lease income exceeds RM1 million.

Lessees that are micro, small and medium-sized enterprises with annual sales of less than RM500,000 are exempted.