Service Tax Issue at Restaurants

The Royal Customs and Excise Department ("Customs") have stated that majority of the restaurants in Malaysia do not need to collect the 5% service tax (on top of the total bill) as the Customs have revised the threshold for tax collection. If the restaurants annual turnover is below RM3.0 million, the restaurants can do away with the 5% service tax and thus reduce the burden on consumers. Thanks to the Customs for their consideration in view of rising cost of living.

But then .............. yeah there's a but. A big BUT actually.

How are we to verify which restaurant's annual turnover is below RM3.0 million?

The Customs have mentioned that only 4,457 restaurants are licensed to collect the 5% service tax and with this new threshold, only 7% of the total number of licensed restaurants have annual turnover exceeding RM3.0 million. With this figure, I would say that those smaller restaurants that me and my friends usually frequent shouldn't be collecting the 5% service tax anymore.

Only last Sunday, I was having dinner at such a small restaurant which still have this 5% service tax in my bill. It didn't strike me there and then. Now, do we ask the restaurant owner for a copy of the service tax licence which permits the restaurant to continue with the collection of the 5% service tax?

How do you think the restaurant owner will react over my query? Probably like this:-

(Waiter hands over the bill with 5% service tax part of the amount to be paid)
Me: Excuse me, why do you still have the 5% service tax in the bill?
Waiter: We have been collecting the 5% service tax for a few years now.
Me: I know that but the Customs Department has mentioned that the 5% service tax has been abolished unless your restaurant's annual turnover is more than RM3.0 million.
Waiter: Yes, our annual turnover is more than RM3.0 million.
Me: Can you prove that?
Waiter: Why do we need to do so?
Me: Because that will verify that your company is authorised to collect the 5% service tax.
Waiter: Only my boss will have those information.
Me: Where's your boss?
Waiter: Not in.
Me: Then how?
Waiter: Pay first and come back to meet my boss another day.

Or it could be like this (after experiencing the first incident with a waiter):-
(Waiter hands over the bill with 5% service tax part of the amount to be paid)
Me: Excuse me, why do you still have the 5% service tax in the bill?
Waiter: It's in the system already. All restaurants do the same.
Me: I don't think so. Where's your boss? (getting smarter)
Waiter: Please wait.
Boss: I understand you have a question on the billing.
Me: Yeah, why do you still have the 5% service tax in the bill?
Boss: The service tax is a standard tax for everyone. No one is exempted.
Me: Didn't you read the newspaper recently that Customs Department has abolished the service tax?
Boss: Really? But we haven't received any notice from them to tell us to stop collecting the service tax.
Me: You don't have to wait. Do you wait for the government to tell you to increase the your food and beverage prices when the petrol price goes up?
Boss: (don't know what to say look)
Me: I need to see your existing service tax licence to show that your restaurant is authorised to collect service tax.
Boss: The licence is not here.
Me: Then I'm not obliged to pay the service tax as according to the Customs Department's ruling which states that licensed restaurant must display their licence in the restaurant.

For your information, lots of restaurants would still be collecting the 5% service tax without the need to remit the amount collected to the Customs as they would be exempted. Where does the money go to then? Into the pockets of the restaurant owners of course!!!!!!

Reading: No service tax at most restaurants - Star
Tags: Royal Customs and Excise Department, Malaysia, Service Tax, Malaysian Restaurant, Service Tax Licence, 5% Service Tax, 5% Government Tax