3 GST Hurdles Malaysians Faced Since April 1


The dust from the Goods and Services Tax (GST) implementation has finally settled and for many Malaysians, it is now business as usual.

However, the initial stages of the tax’s introduction was not without its share of glitches. Much of it stemmed from not issuing proper receipts and the lack of proper guidelines and understanding of how the tax actually works.


We look back at some of the hiccups that Malaysians faced since its implementation and the steps that have been taken to address them.

1. The confusion between service tax and service charge

Many Malaysians were confused between service tax and service charge during the initial stages of GST implementation. Many were under the impression that the advent of GST would eliminate service fees altogether, and were in a rude shock when they noted the item in their receipts.

First things first – service tax and service charge are not one and the same. Service tax is a form of tax collected by the service provider on behalf of the government (this has been replaced by GST).

Service charge, on the other hand, is a fee charged by the service provider for delivering services. Restaurants typically impose 10% service charge for serving customers food and beverages.

Unlike the previous service tax, service charge does not go to the government. Instead, the amount collected from service tax is usually shared among the waiting staff at the end of every month.

So don’t be surprised the next time you discover that service charges are still applicable when you dine out. Consequently, the lack of understanding of the differences between the two had led to the next hiccup.

2. Service charge – to pay or not to pay?

One of the most prominent issues that cropped up following the implementation of GST was whether or not we still need to pay the service charge imposed by many hotels and restaurants.

It all started when Deputy Finance Minister Ahmad Maslan made a statement that the 10% service charge need not be paid if the service is not up to par.

This has resulted in many consumers refusing to pay for service charges, with many groups and individuals calling for the complete removal of the “tax”.

Meanwhile, restaurant and hotel owners argue that the removal of service charge would negatively impact the livelihood of their employees, who rely on collection of the fee to cover their daily living expenses.

Amid the controversy, it has finally been announced in late April that the Government will allow businesses to continue implementing the service charge.

However, hotels and restaurants that impose service charge must display a notice informing consumers of the fee from May 1, 2015 onwards or risk a fine of up to RM100,000.

The good news is, you can still skip paying GST and/or service charge at some of these cool places in the Klang Valley.

3. Can telcos charge GST or not?

There has been much confusion over whether or not telecommunication companies (telcos) can charge GST for mobile phone prepaid cards.

Some telcos have increased the price of their prepaid reload coupons to include the 6% GST, while the Government had maintained that the prices would remain.

Ahmad Maslan had said that the increase should not have happened as the Customs Department had sent official letters informing telcos not to impose GST on their reload coupons.

He also said a RM10 reload coupon would still cost the same post-GST as GST would merely replace the previous 6% sales and service tax.

On April 29, Customs Director-General Datuk Seri Khazali Ahmad announced that telcos will revert to the old pre-GST pricing for prepaid reloads from May 1.

However, the Malaysian Communications and Multimedia Commission (MCMC) had clarified on the same day that it will be impossible to bring down prices of prepaid reloads to pre-GST prices immediately, due to the huge logistics and costs involved in implementing the change.

MCMC chairman Datuk Sri Dr Halim Shafie said in a press statement that doing so will involve reconfiguring the systems, as well as production and distribution of new stocks of prepaid cards, all which will incur significant costs to both service providers and third-party agents.

On May 14, it was finally decided that prepaid mobile users will get air time of RM10 for every RM10 top-up, but they will have to pay GST for calls, text messages and data usage.

This will be implemented from 2016 to give telcos time to prepare ahead. The current RM10.60 charge (inclusive of 6% GST) for a RM10 top-up will stay until the end of the year.

GST was introduced as part of Malaysia’s tax reform initiatives to make the system more efficient, effective and transparent. The tax is expected to increase the country’s Gross Domestic Products (GDP) by 0.3% and exports by 0.5% in 2015 and 2016 respectively.

Did you encounter any GST hiccups since its implementation? Share your story with us in the comment section below. 

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