PETALING JAYA: The Malaysian Association of Tour and Travel Agents (MATTA) is urging the government to review the imposition of the Sales and services Tax on tourism management services which came into effect on Friday (Mar 1).
Its president Datuk Tan Kok Liang, in urging a reversion to an earlier decision to exempt the tour and travel industry from SST, described the the government's Jan 1 decision as “fundamentally flawed”.
Tan said it would have serious adverse implications on the tourism industry, especially when the treatment details and mechanism of reporting were unclear.
“Under the service tax model introduced in September 2018, the tour and travel industry was not included in the scope of the service tax.
“When the previous Goods and Services Tax (GST) regime was introduced, the industry was given ample time to make preparations, whereas this sudden announcement has left the industry floundering and confused,” he said in a statement Saturday (Mar 2).
Tan said in a meeting with MATTA on Feb 15 that the Customs Department explained that the treatment of reporting and paying the service tax is based on either total amount billing or itemised billing.
However, he added that MATTA disagreed with both approaches as total amount billing would have elements of cascading taxation in the supply chain of services, while itemised billing was unfair to travel agents as it required businesses to expose their margins.
He also questioned what quantum of tourism management services should be charged to tourists.
“The Service Tax (Amendment) (No.3) Regulations 2018’s amendment Regulation 10 appears to be a somewhat mitigating factor between SST registered travel agents but still does not provide any viable solution to the industry’s predicament.
“The tax will affect most travel agents in Malaysia who have committed to contracts before March 1, 2019, with their overseas agents for the year 2019 until 2020. Travel agents may face challenges in absorbing the additional costs,” he said.
Tan said this risked making Malaysia less attractive to inbound tourists and placed an undue burden on domestic travellers due to the potential cascading tax effect.
Tourist arrivals last year missed the revised targets set by the Ministry of Tourism, Arts and Culture of 26.4 million tourists, said Tan.
Similarly, tourist arrivals fell 0.46% to 25.83 million last year from 25.95 million in 2017, hence there was a need to ensure Malaysian tourism industry players maintain a competitive advantage, he added.
Tan also called for calm among MATTA members, saying that the body was urgently seeking clarification from the Customs Department.
“MATTA supports the government tax model aimed at stabilising the financial status of the country.
“However, the service tax treatment must be clear in taking into consideration the current business model of tour and travel operators,” he said.