Service tax exemption: Govt to widen scope for logistics, especially B2B

PETALING JAYA: The government says it will widen the scope of the 6% service tax exemption for the logistics sector, especially for business-to-business (B2B) transactions.

The Finance Ministry said the decision was made based on the feedback and views submitted by various parties including MPs.

“This is to reduce the incidence of double taxation or the cascading effect from the imposition of tax on several layers of the logistics supply chain.

“For example, with this B2B exemption expansion scope, freight forwarding service providers not only get exemptions on freight services but are also eligible for exemptions on other services such as warehousing, ports, shipping, and cold chain facilities that are in the same list as freight services.

“We will continue to hold engagement sessions with the industry especially from the logistics sector to finalise amendments to the guidelines, enabling their enforcement,” the ministry said in a statement on Sunday (March 10).

In addition, the government understands the need for industry players to have sufficient time to amend their computing systems.

As such, the newly-registered logistics service providers are given a one-month preparation period and the 6% service tax will be imposed from April 1, the ministry said.

It hoped this special consideration would support the growth of the country’s logistics sector while ensuring consumers, including traders, are not burdened.

The announcement of the expansion of service tax exemption scope was made by Finance Minister II Senator Datuk Seri Amir Hamzah during his winding-up speech on the motion of thanks on the royal address on Monday (March 11).

He had said improvement on the scope of service tax exemptions for the logistics sector was to reduce the impact of double taxation.

As announced in the 2024 Budget, logistics services are subjected to 6% service tax beginning March 1.

Following 25 engagement sessions with various stakeholders including the logistics sector prior to the implementation of this tax change, the government granted service tax exemptions for logistics services for directly exported goods; logistic services of transshipment activities; logistics services of transit activities, door-to-door logistics services, and food and beverage delivery services through ecommerce.

In order to reduce the negative impact on the daily operations of logistics activities, the government has also provided exemption facilities between B2B whereby providers do not have to pay service tax on the acquisition of the same logistics service component.