THE government has announced that it will widen the scope of the 6% service tax exemption for the logistics sector, in particular for business-to-business (B2B) transactions.
The scope of the tax exemption for logistics services initially covered services for direct export goods, transhipments, transit activities, door-to-door deliveries, food and beverage deliveries through e-commerce platforms, and B2B transactions.
In a statement, the Finance Ministry noted that the decision was made based on feedback and views that were submitted by various quarters, including by MPs.
The finance ministry said Putrajaya has since agreed to widen the scope of the exemption for B2B logistics services to “include the provision of services under the same item”.
“This is to reduce the incidence of double taxation or the cascading effect from the imposition of tax on several layers of the logistics supply chain,” the ministry stated.
“For example, with this B2B exemption expansion scope, freight forwarding service providers not only get exemptions on freight services but are also eligible for exemptions on other services such as warehousing, ports, shipping, and cold chain facilities that are in the same list as freight services.”
In addition, the ministry said it will continue to hold engagements with industry players, especially those in the logistics sector, to finalise amendments to the guidelines for the tax scheme.
It also said the tax would only be enforced from April 1 to give newly-registered logistics service providers time to amend their computing systems in line with the service tax.
“The finance ministry hopes that this special treatment can continue to support the growth of the nation’s logistics sector while ensuring its users, including traders, would not be burdened,” it said.
The announcement of the expansion of service tax exemption scope was made by Finance Minister II Senator Datuk Seri Amir Hamzah Azizan during his winding-up speech on the motion of thanks on the royal address on Monday (March 11).
Amir said improvement on the scope of service tax exemptions for the logistics sector was aimed at reducing the impact of double taxation.
As announced in the 2024 Budget, logistics services are subjected to 6% service tax beginning March 1.
Following 25 engagement sessions with various stakeholders including the logistics sector prior to the implementation of this tax change, the government granted service tax exemptions for logistics services for directly exported goods; logistic services of transshipment activities; logistics services of transit activities, door-to-door logistics services, and food and beverage delivery services through ecommerce.
In order to reduce the negative impact on the daily operations of logistics activities, the government has also provided exemption facilities between B2B whereby providers do not have to pay service tax on the acquisition of the same logistics service component. – March 11, 2024
Main pic credit: The Edge Malaysia
