Service Tax (Rate of Tax) (Amendment) Order 2024

The Service Tax (Rate of Tax) (Amendment) Order 2024, a significant legislative update, has been officially gazetted on 26 February 2024 and revises the standard service tax rate while retaining lower rates for certain services.

Key Points

• Increases standard service tax rate from 6% to 8% effective 1 March 2024
  

• Retains 6% service tax rate for:
  

  • Food and beverage services

  • Telecommunication services

  • Parking place services

  • Logistic services
    

• Transitional rules on charging a 6% or 8% service tax rate for services spanning the effective date
  

• Transitional rules on payments received before but relating to services provided after the effective date

Transitional Rules

1. Services spanning the effective date (Paragraph 3(a))

• For taxable services provided before but continuing after 1 March 2024:

  • Service tax to be charged at 8% on the proportion of services that can be attributed to the period after 1 March 2024

• Effectively, services spanning the periods before and after the effective date will be subject to differential tax rates
  

1. Payments received before the effective date (Paragraph 3(b))

• For taxable services where any payment was received before 1 March 2024 (even though service is provided after)

  • Service tax rate of 6% applies on such payment already received
    

1. Registered persons to provide betting and gaming, accounting based on payments (Paragraph 3(c))

• For registered persons who account for service tax when payment is received

  • Payments received before 1 March 2024 - 6% rate

  • Payments received on or after 1 March 2024 - 8% rate

  • Any invoice issued for a taxable service to be provided after the effective date of the order - - 8% rate
    

1. Imported taxable services (Paragraphs 3(d) and (e))

• Similar differential rate for imported services spanning the effective date or where due date differs from when service was acquired

The rules cater for the transition and avoid a sudden change in service tax rate on payments already received.

The amended differential service tax rates seek to balance government revenue needs and socio-economic considerations. Businesses should review the change in the standard service tax rate and check if transitional rules apply to their services.

Reference:

323.1 [P.U (A) 64_2024] Service Tax (Rate of Tax) (Amendment) Order 2024.pdf

Download PDF • 215KB