MoF refines scope for Service Tax exemptions in logistics sector


Amir Hamzah says Service Tax exemptions for the logistics sector and maintenance services will also help to maintain the competitiveness of the nation’s services sector. – Bernama photo

KUALA LUMPUR (March 31): The Ministry of Finance (MoF) has refined the scope for Service Tax exemptions to alleviate the direct impact on the rakyat’s living cost and cascading tax incidences in the logistics sector.

Finance Minister II, Datuk Seri Amir Hamzah Azizan said the Service Tax exemptions for the logistics sector and maintenance services will also help to 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 trade zones,” he said in a statement today.

To ease the tax impact on daily logistics operating activities, and ultimately the consumers, the government has agreed on the amendments to Group J: Logistics Services in First Schedule, Service Tax Regulations 2018.

“Item 1(a) in relation to logistics services, and Item 1(b) on delivery or distribution or transporting services have been merged into a single item.

“By combining the two items into one, the exemption scope for business-to-business (B2B) activities has been widened whereby logistics service providers classified under Item 1(a) are now no longer required to incur Service Tax for acquiring delivery or distribution or transporting services previously listed under Item 1(b),” it said.

Previously, logistics service providers under Item 1(a) were entitled to tax exemptions for acquiring services under the same item only, the ministry said.

MoF added that all services under Group J: Logistics Services provided in or between Special Area/Designated Area are not subject to the Service Tax, except for Customs Agent services where the tax remains applicable.

“The Free Commercial Zones and Free Industrial Zones such as the Port Klang Free Zone and West Port in Selangor, as well as the Pasir Gudang Port in Johor, shall benefit from this exemption,” it said.

MoF said the government also provided an exemption for ocean freight charges for all goods delivered by sea, limited to deliveries from Peninsular Malaysia to Sabah/Sarawak/Labuan;  Sabah/Sarawak/Labuan to Peninsular Malaysia; and between Sabah, Sarawak, and Labuan.

These enhancements are additions to the widening of Service Tax exemption scope for logistics sectors announced on March 11, 2024, it said.

Besides that, MoF said the Service Tax 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 the residential premise’s structure such as lifts, air conditioners, and water heaters are not subject to Service Tax,” MoF said.

The ministry emphasised that the increase of the Service Tax rate from 6.0 to 8 per cent that came into effect on March 1 is concentrated on services that are discretionary in nature and B2B activities that do not directly impact the rakyat.

The increase does not involve key essential services that are part and parcel of the rakyat’s lifestyle such as food and beverages, telecommunications and vehicle parking, it added. – Bernama