Indirect Tax Alert: Release of Sales Tax (Imposition of Sales Tax In Respect to Special Areas) (Amendment) Order 2021and Updated Service Tax Policy No. 2/2021
EY has outlined below the key highlights of the following Indirect Tax updates:
Sales Tax (Imposition of Sales Tax In Respect of Special Areas) (Amendment) Order 2021
The Sales Tax (Imposition of Sales Tax In Respect of Special Areas) (Amendment) Order 2021 (the Order), published in the Federal Gazette, came into effect on 3 September 2021. Under the Order, sales tax shall now be charged on the following:
► Goods under Schedule A which are imported or transported into a free zone, licensed warehouse, or licensed manufacturing warehouse to be used or consumed in a free zone, licensed warehouse or licensed manufacturing warehouse
► Wine, spirit, beer, malt liquor, tobacco and tobacco products imported or transported into Tasik Kenyir Duty Free Area
► Certain taxable goods, such as cigarettes, tobacco products, smoking pipes (including pipe bowls), electronic cigarettes and similar personal electronic vaporizing devices, preparation of a kind used for smoking through electronic cigarettes and electronic vaporizing devices, in the form of liquid or gel, and not containing nicotine, which are imported or transported into a free zone, other than free zone authorized under Section 6A of the Free Zone Act 1990, for the purposes of re-export
► Certain taxable goods, such as cigarettes, tobacco products, smoking pipes (including pipe bowls), electronic cigarettes and similar personal electronic vaporizing devices, preparation of a kind used for smoking through electronic cigarettes and electronic vaporizing devices, in the form of liquid or gel, and not containing nicotine, which are imported or transported into a free zone authorized under Section 6A of the Free Zone Act 1990
Amendments to the Service Tax Policy No. 2/2021 (STP 2/2021) (only available in Bahasa Melayu at this juncture)
► Effective 1 July 2021, only the provision of accommodation premises, being a taxable service prescribed under Column 2, Group A: Accommodation, First Schedule of the Service Tax Regulations (STR) 2018, is exempted from service tax until 31 December 2021. This is in line with the PEMERKASA package announced by the Prime Minister on 17 March 2021.
► Recently, the STP 2/2021 was amended by Customs to provide further clarity to the list of services which qualifies for the service tax exemption.
► Below are the service tax treatments covered under the amended STP 2/2021:
| Taxable services under Column 2 of Group A: Accomodation | Service tax treatment |
| Item (a) – Provision of accommodation premises excluding accommodation premises provided by an employer as a facility to his employees
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► Accommodation packages provided with or without breakfast, to any person staying at the accommodation premises, will be exempted from service tax.
► To the extent that additional items (e.g., breakfast for children, lunch and dinner meals) are added to the package, such items will be subject to service tax. ► In the event that the accommodation package, seminar package and its corresponding additional items cannot be itemized on the invoice, the total invoice will be subject to service tax.
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| Item (b) – Provision of any other taxable service specified in other Groups in this Schedule | ► For accommodation premises operating as quarantine centers, in which food are catered from third-parties, the provision of accommodation services will be exempted from service tax.
► However, the provision of food by an accommodation premise operating as a quarantine centre will be subject to service tax. ► Similarly, for accommodation premises operating as quarantine centers, in which food and laundry services are included as part of the package:
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| Item (c) – Provision of other services within the accommodation premises
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► The rental of hall or space within the accommodation premises are not eligible for the service tax exemption under STP 2/2021 and such services will be subject to service tax.
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| Item (d) – Provision or sale of tobacco products and alcoholic and non-alcoholic beverages
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► The provision of tobacco products, alcoholic and non-alcoholic beverages in the accommodation premises are not eligible for the service tax exemption under STP 2/2021 and such services will be subject to service tax.
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The full and complete version of the above-mentioned amended Guide and Policy issued by the RMCD can be found in the MySST Portal.
For further clarification or enquiries on the above, please contact the EY Indirect Tax team listed above.
