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
- 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
- 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
- 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
- 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.
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