Vehicle maintenance may cost more from next year, when service tax increases from 6% to 8% on March 1

During Budget 2024, it was announced that service tax will be increased from the 6% rate at present to 8% next year. This will start from March 1, as indicated by the customs department recently.

Exclusions to the new rate include that for food and beverage, telecommunication, provision of parking spaces and logistics services, but vehicle servicing and repairs do not fall under the exempted categories under the revision.

As such, the new 8% tax rate is set to be applied to vehicle servicing in terms of labour charges, but not the parts used in the course of servicing. This will likely result in higher overall vehicle servicing costs when the new rate begins, as The Star reports.

However, there has been no official confirmation about this, and the Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) industry players has called on the government for clarity on the matter.

Its president Datuk Tony Khor said that while the new service tax rate would not directly affect car prices, it would certainly have an impact on maintenance costs. “I guess the new tax rate will be applicable to car workshops too, although the government has not confirmed it,” he said.

He added that any increase might be significant to second-hand car owners with a limited budget. “I understand that car maintenance expenses may increase but as owners, we also need to ensure vehicle safety and roadworthiness,” he said. Khor said the association would be requesting the government to consider waiving the extra 2% hike on service tax for small workshops and those who drive second-hand cars.

Tax expert Datuk Koong Lin Loong echoed Khor’s views, saying that while car prices are not likely to be affected, owners will need to fork out more money for maintenance if the new rate is applied.

“Car prices will only be affected by (and changes to) sales tax, import duty, excise duty and approved permits. However, car-related services such as repairs and maintenance will involve a labour charge and the additional 2% tax,” he said.

Looking to sell your car? Sell it with myTukar.