Hoteliers insist 10pc service charge not going anywhere

The service charge is normally imposed at a rate of 10 per cent in place of a tipping system. — Picture by Yusof Mat Isa
The service charge is normally imposed at a rate of 10 per cent in place of a tipping system. — Picture by Yusof Mat Isa

KUALA LUMPUR, July 18 — The 10 per cent service charge levied by restaurants and hotels will remain even when the Sales and Services Tax (SST) returns on September 1, said the Malaysian Association of Hotels.

MAH president Cheah Swee Hee said this was because the charge was unrelated to any tax regime, be it the SST or the Goods and Services Tax (GST) it will replace.

“The SST is a government tax while the service charge is distributed among the service crew of the hotel,” Cheah was quoted as saying in a report by The Star newspaper today.

“The rest of the hotels implement clean wage system to meet the minimum wage requirement,” he said.

The Customs Department’s website states that the service charge is a fee on top of the cost of goods or services imposed by businesses in a bill.

The service charge is normally imposed at a rate of 10 per cent in place of a tipping system.

Industry players say it is standard practice to retain a certain percentage of the service charge collected to cover breakages and staff events, while the majority goes back to the staff.

After GST was rolled out in April 2015, the then Domestic Trade, Co-operatives and Consumerism Ministry said restaurants and hotels were only allowed to impose service charge if they had an employer-employee collective agreement in place, and a notice on the charge must be put up.

Under the previous SST regime, the government only imposed a 6 per cent service tax on businesses that made had a turnover of more than RM450,000 per year.

Several restaurants in Penang said service charge is here to stay as the collection is for the benefit of the workers.

The manager of Foong Wei Heong Restaurant, who wanted to be known only as Ooi, told The Star that a 5 per cent service charge is imposed for the provision of services, including cooking and serving.

Ooi is worried that when SST is re-introduced, many might take the opportunity to increase prices again, and hoped the government will take the necessary precaution to prevent that.

“GST is actually a good system if done the right way as the traders can claim for a refund when buying raw materials and other inputs for their business,” he said.