Understanding some basic concepts in Service Tax Act 2018
Are you a ‘taxable person’ under Service Tax Act 2018?
Are the services or goods provided/sold considered as ‘taxable
service’ under the Service Tax Act 2018?
How do I know that I should apply for registration under
Service Tax Act 2018?
How is threshold determined under the Service Tax Act 2018?
The Customs Dept has published a Guide :General Guide Service Tax 2018 that gives a basic
understanding, legal obligations and responsibilities of businesses that are
engaged in providing certain services or goods with an annual sales turnover of
taxable services at the threshold stated of their duty to register.
Common Terms Used
Some common terms or jargon that are used are defined in the
introductory Section of the Service Tax Act and quoted below:
“taxable service” means any service which is prescribed to be a
taxable service under section
“taxable person” means a registered person or a person who is
liable to be registered under section
12;
“prescribed” means prescribed by the Minister in the
regulations made under this Act;
“designated areas” means Labuan, Langkawi and Tioman;
“special areas” means any free zone, licensed warehouse and
licensed manufacturing warehouse,
and the Joint Development Area;
For other terms you encounter refer to the Service Tax Act,
Customs Act 1967 or the Free Zones Act 1990
Service Tax Act 2018
Part IV
REGISTRATION
Liability to be registered
12. (1) The Minister may prescribe—
(a) any person who
provides any taxable service; and
(b) the total value of
taxable services of the person referred to in paragraph (a), for the purpose of
registration of the person under this Part.
(2) Any person who
provides any taxable service is liable to be registered at the following time,
whichever is the earlier:
(a) at the end of any
month, where the total value of all his taxable services in that month and the
eleven months immediately preceding that month has exceeded the total value of
taxable service prescribed under subsection (1); or
(b) at the end of any
month, where there are reasonable grounds for believing that the total value of
all his taxable services in that month and the eleven months immediately
succeeding that month will exceed the total value of taxable services
prescribed under subsection (1).
(3) Notwithstanding
subsection (2), the Minister may prescribe that any person who provides taxable
services shall be liable to be registered on the date of the commencement of
the business.
(4) The total value of
all taxable services of a person providing taxable services in the month and
the eleven months immediately preceding that month referred to in paragraph
(2)(a) shall be disregarded if—
(a) the registration
of the person providing the taxable services is cancelled, otherwise than under
subsection 20(3), during that period; and
(b) the Director
General is satisfied that before the person’s registration is cancelled, he has
given all information required by the Director General in order to determine
whether to cancel the registration or not.
Application for registration
13. (1) Any person who is liable to be registered
under section 12 shall apply to the Director General for registration as a
registered person in the prescribed form not later than the last day of the
month following the month in which he is liable to be registered as referred to
in paragraph 12(2)(a) or (b) or subsection 12(3).
(2) Upon receipt of
the application under subsection (1), the Director General may approve the
registration, subject to such conditions as he deems fit.
(3) The Director
General shall register the person under subsection (1) with effect from the
first day of the month following the month in which the application under
subsection (1) is made or from such earlier date as may be agreed between the
Director General and the person but such date shall not be earlier than the
date the person becomes liable to be registered.
(4) Where any person
fails to comply with subsection (1), the Director General shall register that
person on the date as the Director General may determine but not earlier than
the date he
is liable to be registered under section 12.
(5) Any person who
fails to comply with subsection (1) commits an offence.
Service Tax
Regulations 2018
TAXABLE PERSONS, TAXABLE SERVICES, ETC.
Taxable persons, taxable services and total value of taxable services
3. Taxable persons,
taxable services and the total value of taxable services shall be as specified
in the First Schedule.
FIRST SCHEDULE
[Regulation 3]
TAXABLE PERSON, TAXABLE SERVICE AND TOTAL VALUE OF TAXABLE
SERVICE
1. The taxable
persons specified in column (1) in Groups A, B, C, D, E, F, G and I of this
Schedule providing any taxable service specified in column (2) in each Group
and exceeds the total value of taxable service specified in column (3) shall
submit an application for registration under section 13 of the Act.
2. The taxable
person specified in column (1) in any Group shall charge service tax on any
taxable service specified in column (2) in such Group provided by him.
Some Important points to note:
1.
Only the value of taxable service need to be
taken into account in determining liability to register ie the threshold stated.
A business could be providing various kinds of services where the annual total
sales turnover is RM800,000.00 and the threshold specified is RM500,000.00.
However the taxable services only amount to RM300,000.00 and the balance of
RM500,000.00 is not taxable services, there is no requirement to register.
2.
A
business providing taxable services through more than one branch all registered
under one business entity with branches located in other states in Malaysia, where
each branch’s annual sales turnover is below the threshold specified would be
required to register if the combined sales turnover of taxable services exceeds
or is at the threshold. See paragraph 26 of Guide.
3.
A
business providing various kinds of taxable services which fall in a particular
Group as listed in First Schedule where each kind of taxable service is below
the threshold would still be required to register is the combined value of the
services exceeds threshold or is at the threshold.
E.g. A business provides taxable services defined in different
groups the applicable threshold is as stated for a particular group for it to
be considered ‘taxable person’. For example a business AMN Co. operating
Parking services and also a Restaurant business. If the annual sales turnover
of the parking business is RM300,000.00 whereas the annual sales turnover of
restaurant is RM 1.2m, ‘taxable service’ that need to be taken into account is both
the restaurant business and the Parking business. This is so as Column 2 in
Group B has the clause : (b) Provision of any other taxable service specified
in other Groups in this Schedule. Hence since in Group B the threshold is
RM1.5m, AMN Co. would be required to register as the ‘taxable service’ is
RM1.5m + RM300,000.00= RM1.8m which exceeds the threshold. In this case Service
tax would be payable on the restaurant business only and not the parking
business.
The term “(b) Provision of any other taxable service specified
in other Groups in this Schedule” appears in Groups A, B, C, D and E only
See paragraph 27 of Guide.
4.
The following
quotations from Groups of the First Schedule illustrates the point:
GROUP B: FOOD AND BEVERAGE
|
(1)
|
(2)
|
(3)
|
|
Taxable
person
|
Taxable
service
|
Total
value of taxable service
|
|
1. Any person operating restaurant, bar, snack bar, canteen,
coffee house or any place which provides food and drinks, whether eat-in or
take away, excluding—
(a) a canteen located in an educational institution;
(b) a canteen operated by a religious institution or body.
2. Any person providing catering services.
3. Any person operating a food court including any eating place
which is centrally managed with a common cashier system and where two or more
person provides food or drinks.
|
(a)
Provision of prepared or served food or drinks.
(b)
Provision of any other taxable service specified in other Groups in this
Schedule.
(c)
Provision of other services, other than
service of rental of space* within the establishment.
(d)
Provision or sale of
(*Amendments)
|
RM
1,500,000
|
GROUP I: OTHER SERVICE PROVIDERS
|
4.
Any person, Government agency, local authority or statutory body who operates
or provides parking spaces.
|
Provision
of parking spaces for
motor
vehicles where parking charges are imposed.
|
RM
500,000
|
5. Likewise a
business operating a restaurant with an annual turnover of RM 1m and operating
parking business at the same premises with an annual turnover of RM400,000.00
would not be considered a taxable person providing taxable services as the
provision of parking spaces is below threshold and restaurant’s business
together with parking business is below RM1.5m.
6. Group G applies
to Professional Services like Lawyers, Accountants, Engineers etc. This Group
doesn’t have sub categories or sub-divisions in Column 1 or Column 2. This
means a firm that engages in providing professional businesses in any of the
services listed would need to take into account the total of all such business
in Group G in determining threshold and if registered, shall be liable to pay
Service tax on all such services.
7. Group I includes
10 business: Other Service Providers which are sub categorized individually
which means the turnover that need to be considered is according to the
category in the sub-division only.
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