There is growing speculation about a possible increase in the service tax from 6% to 8%, effective March 1, 2024. Although there’s no official confirmation, the Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) is preparing for the potential impact. One significant area that could be affected is vehicle repairs and maintenance, which does not fall under the exempted categories for the higher tax regime.
While this adjustment is not expected to directly influence car prices, it is likely to result in higher maintenance costs for vehicle owners. According to The Star, the FMCCAM is planning to engage with the government, requesting considerations for small workshops and owners of second-hand cars by seeking an exemption from the additional 2% tax.
Datuk Tony Khor, President of FMCCAM, acknowledges that while the increase may seem small, it could have a notable impact on second-hand car owners with limited budgets. Despite concerns, Khor emphasises the importance of maintaining vehicle safety and roadworthiness.
The Customs Department has announced the service tax rate increase but has not provided comprehensive guidelines. Tax experts suggest that while car prices may remain unaffected, owners might have to allocate more funds for maintenance services. The potential 2% tax increase could apply to labor charges associated with repairs and maintenance.
Additionally, the automotive industry in Malaysia awaits further clarification on the implementation of the High Value Goods Tax (HVGT) scheduled for May. There are uncertainties about potential double taxation on luxury cars and whether the existing sales tax would be included in the new HVGT structure.
As discussions continue within the industry, stakeholders are hopeful for engagement with the Finance Ministry to address concerns and provide clarity on the upcoming tax changes.
