In line with the recent Budget 2024 announcement, the Malaysian government is set to implement a service tax increase from the current 6% to 8% starting March 1. While certain categories like F&B and telecommunications are exempt, consumers, especially motorists, are bracing for increased costs across various sectors.
One noticeable impact will be on vehicle servicing and repairs, as these do not fall under the exempted categories. Come March 1, vehicle maintenance costs are expected to rise. It’s important to note that the service tax in this context applies solely to labour charges and not to the cost of parts.
Beyond vehicle maintenance, motor insurance is another area where Malaysians can expect to pay more due to the 2% increase in service tax. Although not widely highlighted in the news, all business-to-consumer general insurance or takaful, excluding medical insurance or medical takaful, will be subject to the service tax hike.
The actual impact on consumers may vary depending on coverage and the premium amount. The service tax for motor insurance is calculated based on the actual premium paid, considering factors such as No Claim Discount (NCD). For instance, if the current service tax on a vehicle insurance premium is RM101.29, the 8% increase would result in a cost of RM135.06.
As the government implements these changes, Malaysian motorists are advised to review their budgets and factor in the expected increases in vehicle maintenance and insurance costs. It remains to be seen how these adjustments will impact consumer spending and the overall economic landscape.
