APA 8023 TAXATION

CHAPTER 3: SERVICE TAX

PREPARED BY
NURUL NABILAH FARHANA BINTI MOHD SUHAMI
01AAT14F2004
FASIHAH BINTI ZAINUDDIN
01AAT14F2003
PREPARED TO
PN.MAZILAH BINTI ABDULLAH

SERVICE
TAX

STUDY GUIDE
F(1) The scope of service tax
a) Describe the scope of service tax
b) List the taxable services and taxable
persons
c) Describe the places deemed to be
outside Malaysia
d) Describe the circumstances in which
service tax is not applicable

SERVICE
TAX

STUDY GUIDE
F(2) The service tax registration
requirements
a) Recognise the circumstances in which a
person must register to service tax
b) Define the term annual sales turnover
c) Compute the total annual sales turnover of a
person to determine the threshold limit
d) Explain the circumstances for the surrender/
revocation of a license

SERVICE
TAX

THE SCOPE OF
SERVICE TAX

SERVICE
TAX

(a)Describe The Scope of

Service Tax
Scope of service tax
Service tax is charged and levied on taxable
services provided by taxable persons.
A new Second Schedule of Service Tax Regulations
1975 (STR)[P.U.(A)52/75] list out the various
categories of taxable person into groups and;
Also its corresponding taxable services, liable for
service tax.
Choong Kwai Fatt,page 627

SERVICE
TAX

(b) List The Taxable Services

and Taxable Persons
Taxable Services
With effect from 1 January 2011, services tax shall be
charged and levied on taxable services (unless
exempted by Minister of Finance) at the rate of 6% of
the price.
Charge of premium of the taxable services
ascertained in accordance with arms length
i.e. the price which would have been charged in the
ordinary course of business.
Choong Kwai Fatt, page 633

SERVICE
TAX

Services tax rate has been fixed at 5%

since the inception of Service Tax Act
1975
at 31 January 1975

Choong Kwai Fatt, page 633

SERVICE
TAX

With effect from 1 January 2010, service

tax is levied an each credit / charge card as
follows:
a) RM50 chargeable on each principal card
(credit or charge card) on the date of issuance
of card, and every 12 months thereafter or
part thereof
b) RM25 chargeable for each supplementary
card (credit or charge card) on the date of
issuance and every 12 months thereafter or
part thereof
ACCA Book, page 419

SERVICE
TAX

Taxable persons
The groups can be summarised as follows:
Group
A
B1
B2
C
D

Hotels
Restaurant located in hotel having > 25 rooms
Restaurant located in hotel having 25 rooms
Restaurant located outside hotel
Night-club, dance halls, cabarets, health centres,
massage parlours, public houses and beer houses
E
Private clubs
E1 Golf course and golf driving range other than those in
group A and E
F
Private hospitals
G
Other service providers

The full list is reproduced

ACCA Book, page 419

SERVICE
TAX

(c) Describe The Places Deemed

to be Outside Malaysia
It is expressly stated in section 1(1) of the
STA 1975 that services tax applies
throughout Malaysia expect Langkawi,
Labuan, Tioman and Joint Development Area
as defined in section 2 Malaysia Thailand
Joint Authority Act 1990

Choong Kwai Fatt, page 594

SERVICE
TAX

(d) Describe The Circumstances in

Which Service Tax is Not Applicable

Service tax will not apply if the

provision of services is in connection
with goods or land situated outside
Malaysia.

Choong Kwai Fatt, page 595

SERVICE
TAX

THE SERVICE TAX

REGISTRATION
REQUIREMENTS

SERVICE
TAX

(a) Recognise The Circumstances in Which a

Person Must Register to Service Tax

Service tax is only levied and charged when

the taxable service provided by the taxable
person for the year (annual sales
turnover) reaches the threshold.
The application for a service tax should be
made immediately when the sales turnover
reaches the threshold (RM 150,000,RM
300,000 or RM 3,000,000 ,whether combined
or singly) for prescribed services and no
wait until the expiry of the 12 month period.
ACCA Book, page 422
Choong Kwai Fatt,
page 595

SERVICE
TAX

(b) Define The Term Annual Sales

Turnover
Annual sales turnover in relation to
any day of the month means the sales
turnover made in the period of 12
months or part thereof immediately
before that month.
The annual sales turnover threshold of
RM 150,000,RM 300,000 or RM 3,000,000
is for a revolving period of 12 months.
ACCA Book, page
422

SERVICE
TAX

(c) Compute The Total Annual Sales

Turnover of a
Person to Determine
The Threshold Limit

For the service tax threshold purposes, there is always a 12

months period working on revolving basis as follows:

Choong Kwai Fatt,

page 595

SERVICE
TAX

The revolving 12 month would

continue until the threshold
reaches the prescribed amount of
RM 150,000 or RM 300,000.
Business enterprises should monitor
their sales turnover.
Effective from 1 January 2008, taxable
persons of Group G (other service
providers) need to be licensed,
irrespective of their annual sales
turnover.
ACCA Book, page 422
Choong Kwai Fatt,
page 596

SERVICE
TAX
EXAMPLE 1 (SINGLY)
MS Services Sdn Bhd (MSEA) commenced employment agency business on 1
April 2008, and closed its first accounts on 31 March 2009 and thereafter to 31
March. The company provides management services. Its sales turnover is as
follows.
RM RM
2008
April
2,500
2009
January
22,000
May
4,000
February
7,000
June
6,000
March 8,000
July 10,000 April
18,000
August 11,000
May
27,000
September 16,000 June
31,000
October 20,000
July 55,000
November
8,000
August 90,000
December
5,000
September 40,000
October 48,000
November
54,000
December
68,000

ACCA Book ,page 422 423

SERVICE
TAX

Required
a) Explain what is meant by annual sales turnover in
determining if a person is required to be licensed under
the Service Tax Act 1975.
b) At what point in time is MSEA regarded as a taxable
person.
c) What must MSEA do in order to be in position to charge
service tax in its invoice.

ACCA Book ,page 422 423

SERVICE
TAX
ANSWER
a) Annual sales turnover in relation to any day of any month means turnover made in
the period of 12 months or parts thereof immediately before that month. The annual
sales turnover is determined on a revolving basis, and not by reference to the
accounting year.
b) The threshold limit is having a total annual sales turnover of more than RM 150,000,
whether combined or singly, of the taxable services mentioned in Group G, as
determined below.
RM
April 2008 to March 2009 119,500
May 2008 to April 2009
135,000
June 2008 to May 2008
158,000
MSEA needs to be licensed from 1 June 2009.
c)

The company should apply to the Customs Department for a service tax licence, so as
to be able to charge service tax from 1 June 2009.
Note: Customs Department refers to the Director General of Customs and Excise.

ACCA Book, page 422 423

SERVICE
TAX
EXAMPLE 2 (COMBINE)
Smart Management Sdn.Bhd (Smart) which commenced business on
1.5.2007 provides services as follows:
Date Management Consultancy
RM000
RM 000
31 May
15
24
30 June
21
32
31 July
25
35
31 August
53
74
30 September
66
60
31 October
70
88
30 November
95
99
a) Explain why Smart is liable to register for service tax.
b) State, giving reasons, the date(s) on which Smart became liable to
register for service tax. (The limit for each type of service(s) is RM
150,000.)

Choong Kwai Fatt, page

650-651

SERVICE
TAX
ANSWER
a) Smart is a taxable person under Group G, Second Schedule, STR, 1975 and
the services (management and consultancy) that the company provides
are taxable services specified in Group G. In respect of each of these
taxable services the limit set for the registration of service tax is a total
annual sales turnover in excess of RM 150,000, whether combined or
singly.
b) Smart become liable to register for service tax sometimes before 31 July
2007. The total annual sales turnover of the combined taxable services of
management and consultancy exceeded the limit of RM 150,000 as shown
below:
Date
Management Consultancy
(Combined)
31 May
15
+
24
=
30 June
21
+
32
=
31 July
25
+
35
=
Total
61
+
91
=

39
53
60
152

Choong Kwai Fatt,

page 651

SERVICE
TAX
(d) Explain The Circumstances For The Surrender/
Revocation of a License

SURRENDER OF LICENSE
The taxable person shall surrender the license to the customs
office in following circumstances:
i. He ceases business in providing any taxable service;
ii. He goes into a partnership, retirement or admission of
partner;
iii. A registered company required his business;
iv. He becomes a taxable person on another group as specified
in Sch2;
v. Any change in the name, location, number of business and
addresses of business; and
vi. He is called upon by the DG.
Choong Kwai Fatt,
page 598

SERVICE
TAX

THANK YOU
FOR
YOUR
ATTENTION