Malaysiakini Letter

Suspend gov't decision on service charge

Lim Kok Cheong  |  Published:  |  Modified:

A major concern after the implementation of the goods and services tax (GST), with effect from April 1, 2015, is the resulting effects on businesses whether the imposition of service charge shall be allowed.

The Domestic Trade, Co-operatives and Consumerism (Ministry has recently issued a directive on the service charge imposed by restaurant and hotel operators that the 10 percent service charge must be stipulated in the collective agreement (CA) between employers and employees before businesses can impose the service charge.

In addition, the outlet must display the certificate on their premises so that the consumer will know they will have to pay the service charge; otherwise they will be charged under Price Control and Anti-Profiteering Act 2011.

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) opined that the government announced this implementation hastily and has caused confusion and chaos among the public.

Subsequently, consumers who are unhappy to pay both service charge and GST have refused to pay the service charge.

This has greatly affected the operation of the businesses and thus put them in dilemma.

Internationally accepted practice

ACCCIM indicated that there are differences between service charge and service tax.

Service charge is the fees collected by businesses which usually will be distributed to the employees.

Restaurants and hotel operators around the world have this convention by imposing the service charge all this while.

Service tax is a form of indirect tax imposed on specified services which are collected by businesses and submitted to the Royal Malaysian Customs Department. This service tax has now been replaced with GST.

ACCCIM opined that businesses and the market need time to adapt to the new taxation regime.

The government should not hastily announce any new policy or implementation; also GST expounded by various government departments shall be consistent in order to avoid confusion in the market.  

ACCCIM stablishing task force on tax

Currently, there is no single piece of legislation to regulate the collection of service charge in the country.

ACCCIM urged the relevant stakeholders to have a consultative dialogue to further explore and discuss the need for the implementation of service charge.

Before any decision or clear guidelines are made, the government authority should suspend the directive given so as not to put a blow on the industry, especially the food and beverage industry and hotel operators, and affect the income of the employees of these sectors.

In view that our country is at the early stage of implementation of GST, business community will encounter problems and difficulties.

ACCCIM hereby announces the establishment of an ACCCIM tax steering task force of which members of the task force are comprises of tax experts and qualified accountants, to collect feedback and study the issues encountered by the business community, and thereafter, submit to the GST monitoring committee of the Finance Ministry as well as GST technical committee of the Royal Malaysian Customs Department through our representatives for discussion and deliberation.     

LIM KOK CHEONG is president of the Associated Chinese Chambers of Commerce and Industry of Malaysia.

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