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KUALA LUMPUR, Aug 30 — The duty-free islands in Malaysia are where tourists usually indulge in a bit of tax-free shopping, but the Sales and Services Tax (SST) that kicks in on September 1 will still affect certain items there, based on the finance minister’s orders.
Under one of the orders in accordance with his powers under the new Sales Tax Act 2018, Finance Minister Lim Guan Eng said sales tax will be charged on the importation of “wine, spirit, beer, malt liquor, tobacco and tobacco products into designated areas”.
“Designated areas” are defined in the Sales Tax Act as Labuan, Langkawi and Tioman — which are duty-free islands.
Under this same order named the Sales Tax (Imposition of Sales Tax in respect of Designated Areas) Order 2018, sales tax will be imposed on the importation of marble and anchovy into Langkawi, as well as the import of motor vehicles into Tioman.
The Royal Malaysian Customs Department’s Frequently Asked Questions on Sales Tax also states that the tax will also be collected on the importation of petroleum into Labuan, Langkawi and Tioman.
Under a separate order named the Sales Tax (Imposition of Sales Tax in respect of Special Area) Order 2018, sales tax will also be charged on the importation of “wine, spirit, beer, malt liquor, tobacco and tobacco products into Tasik Kenyir Duty Free Area”.
Sales tax will also be collected on a list of items that are either imported goods to be used or consumed in “free zone” areas — which are defined as free commercial zone and free industrial zone.
The list of goods includes forklifts, crane, office equipment or furniture, firefighting and pollution control equipment, motor vehicles and spare parts, tyres, petroleum and petroleum products, explosives and chemicals, air conditioning equipment, and manufacturing aids.
In another order named Service Tax (Imposition of Tax for Taxable Service in respect of Designated Areas and Special Areas) Order 2018, Lim through his powers under the Service Tax Act 2018 ordered that service tax be imposed on five types of services even when it involved the duty-free islands or special areas.
Special areas are defined in the Service Tax Act as any free zone, licensed warehouse and licensed manufacturing warehouse.
The order said service tax will be charged on the provision of accommodation places by operators of hotels, inns, service apartment, homestay, lodging house or any similar places.
But service tax will not be imposed on accommodation provided by employers to employees; registered religious or welfare bodies for non-commercial purposes; and those provided by the federal government, statutory body and local authorities, registered private higher educational institutes for educational, training or welfare purposes.
The service tax will also be charged on food and beverage services provided by caterers, food courts and restaurants, bars, snack bars, canteen, coffee houses and similar places, unless for canteens in educational institutions or operated by religious bodies.
Other services that will be taxable are the provision of passenger air transport services or telecommunication services between duty free islands and between special areas and from either duty-free islands to special areas or vice-versa.
The provision of services for clearing goods from customs control in special areas will also be taxed, according to the order.
In the three orders by Lim that were all made on August 28, the rate of sales tax and service tax to be imposed were not specified.
But it was reported today that the sales tax will be collected at either five per cent or 10 per cent, while service tax will be collected at 6 per cent.