Hi! Edwin here to answer one of the frequent question asked by my foreign friends who intend to do business in Malaysia and they often get confused if service charge, service tax and government taxes are all the same
A service charge is a charge over and above the cost of goods or services imposed by business to its customer, normally stated in the bill. This is normally applied in the hospitality industry and the normal rate is 10%.
The establishment then accumulates the charge into a fund and is to be paid to its workers. Service charges can be a replacement for tipping charge albeit not necessary.
Service tax or government tax is a legislated tax at rate fixed at 6% (effective From January 2011) imposed under the Service Tax Act.. This is imposed by businesses in the hospitality industry (or any services industry) under license by the Customs Department.
The service tax collected by the business is paid to the government once every two months. Service tax is not imposed on the service charge but on the cost of goods or services provided.
Only businesses and the type of services that are listed in the Second Schedule of the Service Tax Regulations 1975 are subject to licensing and payment of service tax.
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