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Service Tax Act 2018: Amendment of Section 10: Rate of Service Tax

Updated: Dec 9, 2023

"Section 10: Rate of Service Tax" is read as follows:-


10(1) [Determination of tax rate]


Service tax shall be charged and levied at the rate fixed in accordance with subsection (2) on the taxable services by reference to the value of the taxable services as determined under section 9.


10(2) [Power of Minister to fix or vary tax rate]


The Minister may, by order published in the Gazette—

  1. fix the rate of service tax to be charged and levied under this Act; and

  2. vary or amend the rate of service tax fixed under paragraph (a).

10(3) [Order to be laid before the Dewan Rakyat]


Any order made under subsection (2) shall—

  1. be laid before the Dewan Rakyat at the next meeting of the Dewan Rakyat; and

  2. at the expiration of one hundred and twenty days from being laid under paragraph (a) or of such extended period as the Dewan Rakyat may, by resolution, direct, cease to have effect in whole if the order is not confirmed, or in part in so far as the order is not confirmed, by a resolution passed by the Dewan Rakyat within the said one hundred and twenty days or, if such period has been extended, within such extended period.

10(4) [Refund of tax after cessation of order]


Where an order ceases to have effect in whole or in part as provided under subsection (3), any service tax charged and levied in pursuance of the order or such part of the order as ceases to have effect shall, subject to subsections (5) and (6), be refundable to the persons by whom such service tax was paid.


10(5) [Claim for tax refund]


Unless the Minister otherwise directs, no service tax refundable under subsection (4) shall be refunded, unless the person by whom the service tax was paid makes a claim in writing to the Director General within one year from the date on which the order ceases to have effect in whole or in part, and the claim shall contain such particulars as the Director General may require.


10(6) [Reduction or disallowance of tax refund]


The Director General may reduce or disallow any service tax refundable under subsection (4) to the extent that the refund would unjustly enrich the person by whom the service tax was paid.


Finance (No. 2) Bill 2023

In general,

  • Subsection (1): Specifies that service tax is charged based on the rate fixed under subsection (2) on taxable services, determined by their value as per section 9.


  • Subsection (2): Grants the Minister the authority, through Gazette orders, to fix, vary, or amend the service tax rate.


  • Subsection (3): Requires any order under subsection (2) to be presented to the Dewan Rakyat (House of Representatives) in the next session. The order ceases to have effect after 120 days unless confirmed by the Dewan Rakyat.


  • Subsections (4), (5), and (6): Address the refund process when an order ceases to have effect. Refundable service tax must be claimed within one year, and the Director General may reduce or disallow refunds to prevent unjust enrichment.

Proposed Amendments:

  • Amendment (a): Alters subsection (3) by simplifying its language, emphasising that any order made under subsection (2) shall be presented to the Dewan Rakyat.

  • Amendment (b): Deletes subsections (4), (5), and (6), removing the detailed provisions related to the refund process after an order ceases to have effect.




Tax Impact:

The proposed amendments streamline the language in subsection (3) without changing the core mechanism of presenting orders to the Dewan Rakyat.


The proposed amendment is to substitute the requirement for obtaining a resolution from the Dewan Rakyat with the simpler requirement of laying the order before the Dewan Rakyat.


This suggests a move towards a more straightforward process, possibly aiming to expedite the presentation of orders without needing a resolution.


The removal of subsections (4), (5), and (6) suggests a potential shift in the refund process, and the impact will depend on the details of any new regulations or mechanisms introduced to replace these subsections.


It is essential to monitor any subsequent legislation or guidelines that clarify the practical implications of these changes.


Summary: The proposed amendment seeks to streamline the language and process in Section 10(3) by removing the requirement for a resolution and emphasizing the act of laying the order before the Dewan Rakyat. This change may aim to simplify administrative procedures related to service tax rate orders.



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