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

STUDY GUIDEF(1) The scope of service tax

a) Describe the scope of service taxb) List the taxable services and taxable personsc) Describe the places deemed to be outside

Malaysiad) Describe the circumstances in which service tax

is not applicable

SERVICE TAX

STUDY GUIDEF(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 limitd) 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 arm’s lengthi.e. the price which would have been charged in the ordinary course of business.

Choong Kwai Fatt, page 633

SERVICE TAX

Choong Kwai Fatt, page 633

Services tax rate has been fixed at 5% since the inception of Service Tax Act 1975

at 31 January 1975

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:

GroupA HotelsB1 Restaurant located in hotel having > 25 roomsB2 Restaurant located in hotel having ≤ 25 roomsC Restaurant located outside hotelD Night-club, dance halls, cabarets, health centres, massage parlours, public houses and beer housesE Private clubsE1 Golf course and golf driving range other than those in group A and EF Private hospitalsG Other service providers

• The full list is reproducedACCA 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.

SERVICE TAX

ACCA Book, page 422Choong Kwai Fatt, page 595

(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.

SERVICE TAX

ACCA Book, page 422

(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:

SERVICE TAX

Choong Kwai Fatt, page 595

• 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.

SERVICE TAX

ACCA Book, page 422Choong Kwai Fatt, page 596

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 RM2008 April 2,500 2009 January 22,000

May 4,000 February 7,000June 6,000 March 8,000July 10,000 April 18,000August 11,000 May 27,000September 16,000 June 31,000October 20,000 July 55,000November 8,000 August 90,000December 5,000 September 40,000

October 48,000November 54,000December 68,000

SERVICE TAX

ACCA Book ,page 422 - 423

Requireda) 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.

SERVICE TAX

ACCA Book ,page 422 - 423

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.

RMApril 2008 to March 2009 119,500May 2008 to April 2009 135,000June 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.

SERVICE TAX

ACCA Book, page 422 - 423

EXAMPLE 2 (COMBINE)

Smart Management Sdn.Bhd (Smart) which commenced business on 1.5.2007 provides services as follows:Date Management Consultancy

RM000 RM 00031 May 15 2430 June 21 3231 July 25 3531 August 53 7430 September 66 6031 October 70 8830 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.)

SERVICE TAX

Choong Kwai Fatt, page 650-651

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 = 39 30 June 21 + 32 = 53 31 July 25 + 35 = 60 Total 61 + 91 = 152

SERVICE TAX

Choong Kwai Fatt, page 651

(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; andvi. He is called upon by the DG.

SERVICE TAX

Choong Kwai Fatt, page 598

THANK YOU FOR YOUR

ATTENTION

SERVICE TAX