Govt expands logistics sector business-to-business service tax exemption

• “This is to reduce incidents of double taxing or cascading effect from the tax-on-tax imposition on several layers of the logistics supply chain.”

KUALA LUMPUR (March 12): Logistics service providers are now further exempted from paying service tax for related services, to reduce instances of cascading effects or double taxation, the Ministry of Finance said.  

This is an additional scope of exemption to logistics services business-to-business (B2B) transactions, which previously only covered the same logistic services components.

With the additional exemption, a freight service provider, for example, will not just be exempted from paying service tax for procuring freight service from another company. The tax exemption will also be for procurement of other logistic services under similar items as the freight service, such as warehousing, shipping, and cold chain services, the ministry said in a statement.

“This is to reduce incidents of double taxing or cascading effect from the tax-on-tax imposition on several layers of the logistics supply chain,” it said.

The exemption follows a total of 25 engagement sessions with multiple stakeholders including logistic players, the ministry said.

“The Ministry of Finance will continue to undertake engagement sessions with industry players especially in the logistics sector, to finalise the amendment to the guidelines to facilitate its enforcement,” it said.

The expanded scope of exemption was also announced by Minister of Finance II Datuk Seri Amir Hamzah Azizan in the Parliament on Monday.

The 6% service tax on the logistics sector was introduced on March 1. Other exemptions on the newly imposed tax include logistics services for transhipment, goods in transit, door-to-door, e-commerce food deliveries, and direct export products.

For newly registered logistics service providers, they will only be imposed the 6% service tax from April onwards, the ministry added.

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