31 October 2018
Kindly be informed the Royal Malaysian Customs Department (RMCD) has responded to the Memorandum on ‘Service Tax Technical Issues for Tour and Travel Industry’ by MATTA submitted on 13 September 2018 based on the format requirement by RMCD.
The submission of the memorandum was a result of a meeting we had with RMCD on 28 August 2018.
We have raised our concerns on the Service Tax treatment with RMCD by MATTA Executive Council members led by Vice President Inbound & Domestic, Jimmy Thoo seeking for clarifications on the treatment to several items subjected to Service Tax such as ‘Hire of Passenger Vehicles Services (HPV Services)’, excursion buses and sale of air tickets and hotel rooms.
In the RMCD's reply dated 16 October 2018 (received on 29 October 2018 by post), the clarifications on treatment of the Sales & Service Tax (SST) on the tour and travel industry, are as follows :-
1. Do travel agents need to charge Service Tax when they sell Domestic Flight tickets?
RMCD: Travel agents are not taxable person under Item 10 of Group I in the First Schedule of the Service Tax Regulations 2018 and hence do not need to charge Service Tax when they sell Domestic Flight tickets.
2. Do travel agents need to charge Service Tax for “excursion bus services” when the tour transportation is part of a tour package?
RMCD: Travel agents have to charge Service Tax for excursion bus service for the tour transportation if they are granted an operator’s licence under the Land Public Transport Act 2010. In the event free bus services are bundled into the tour package, it is not subject to service tax.
3. Do travel agents need to charge Service Tax on “airport transfers with guide”?
RMCD: Travel agents need to charge service tax on the component of transportation using the excursion bus. The component of tour guide services to accompany the tourists are not subjected to service tax. If it is billed as a single service, the whole amount is subjected to service tax.
4. Do travel agents need to charge Service Tax for “arrangement fees”?
RMCD: A travel agent arranging a MICE event is considered as providing management services and subjected to service tax under item 9 of Group G in the First Schedule of the Service Tax Regulations 2018.
5. Does the billing method affect Service Tax exposure?
RMCD: Arrangement fee is subjected to service tax, while the disbursements are not provided they are billed based on actual cost incurred and attached with accompanying invoices. However, if such fee and charge are not being itemised, the lump sum amount charged on the invoice is subjected to service tax.
6. Do travel agents need to charge Service Tax when they re-sell hotel rooms?
RMCD: Travel agents are not taxable person under Group A in the First Schedule of the Service Tax Regulations 2018 and hence do not need to charge Service Tax when they re-sell hotel rooms.
You can refer to the official letter by RMCD at the below link.
MATTA is appealing with RMCD on the treatment of the service tax to some of the decisions as in the said letter by RMCD. We are also seeking for an appointment to meet with RMCD on the matter.
We will keep members updated with any further development on the matter after meeting with RMCD.
PHUA TAI NENG
Chief Executive Officer