Service tax increase: Will Malaysians pay more for food and drinks?

14 Oct 2023 08:16pm
Pix for illustration purpose only. - Photo by Bernama
Pix for illustration purpose only. - Photo by Bernama

SHAH ALAM - It is still too early to say whether Malaysians will have to pay more for food and drinks due to the service tax increase, says Universiti Teknologi Mara Economics and Finance senior lecturer Dr Mohamad Idham Md Razak.

"The extent to which the tax hike will affect the situation will differ based on several factors.

"These factors include how businesses set prices for their customers, how sensitive the demand for food and beverages is to price changes, and the overall economic conditions.

"Even though food and drinks will not be directly taxed, the price of these items may still increase due to the rise in the cost of production and transportation.

"This is because businesses in the food and beverage industry will now have to pay service tax on their inputs, such as raw materials and packaging," he told Sinar Daily when contacted.

However, Idham also noted that the government is taking steps to mitigate the impact of the service tax increase on consumers.

"For example, the government has decided not to raise taxes on food and drink.

"The government has expanded the scope of taxable services to include logistic services, brokerage, underwriting, and karaoke.

"This means that businesses in these industries will now have to pay service tax, which could help make up for the revenue lost due to the tax increase's exclusion of food and beverages," he said.

Prime Minister Datuk Seri Anwar Ibrahim announced in his Budget 2024 speech yesterday that the government will increase the service tax rate from 6 per cent to 8 per cent.

However, he also noted that this increase will not include food, beverages, or telecommunications services.