The luxury products tax, first suggested in Budget 2023, has been reintroduced in Budget 2024 as the high value goods tax (HVGT).
Datin Seah Siew Yun, Grant Thornton Malaysia’s national tax practise head, stated that the luxury products tax and the sales and service tax (SST) are two distinct sorts of taxes with unique purposes.
“SST is levied on a wide range of goods.” HVGT, on the other hand, is often levied on a limited number of high-value commodities that are seen as indulgences. While the HVGT rate has been stated as 5% or 10%, it remains to be determined whether it is a tax in addition to sales tax.”
In terms of service tax, Seah stated that the rate will be raised and the scope will be expanded to include more services.
“The implementation of a higher tax rate and expanded scope must be carefully considered, as well as how they will be applied.” Will the higher tax rate or newly scoped services be liable to tax depending on the date of the contract, the execution of the services, or the date of the invoice if a contract is ongoing?”Failure to adequately define the parameters and application may lead to unneeded disagreements in the future. As a result, consultation between enterprises and authorities is critical to avoiding future problems.”
Furthermore, according to Seah, e-invoicing is a digital means of creating and exchanging invoices that can improve productivity and eliminate errors in the invoicing process.
“However, e-invoicing has been implemented in many countries to complement the goods and services tax (GST) or value added tax.”It enables the matching of output tax with input tax, removing uncertainty in input tax claims and the need to validate them during an audit. Given that Malaysia currently lacks GST, what benefits can e-invoicing provide in terms of efficiency and effectiveness?”
According to Seah, the intention behind replacing GST with SST was to generate more disposable revenue, which would promote consumer spending and corporate activity.
“However, this is now in doubt as the service tax rate will be increased by 2%.”
According to her, the new service tax coverage will also encompass logistic services, which comprise warehousing, goods shipping, and courier services by definition.
“They will now be subject to service tax at 8%, when previously it was only logistic management services that were subject to service tax.”
According to Seah, logistics and transportation expenses might eat into every ringgit earned because they will touch multiple stages in the supply chain, from raw material procurement to final product delivery.
“Rising fuel costs are already a major issue for the logistics industry.” “With the impending rationalisation of fuel subsidies, the government should reconsider the need to subject logistic services to service tax,” she said.
Seah also mentioned that numerous measures, such as environmental and social governance compliance for publicly traded enterprises and e-invoicing, will be adopted in the near future.
