~Updated on 19th February 2024~
In response to the recent announcement in Malaysia's Budget 2024 presented in Parliament, a significant development is on the horizon that may cast a substantial impact on the hotel industry. There is an increase in the Sales & Services Tax (SST) from the current 6% to 8% which will take effect from 1st March 2024.
SST is a short form for Sales and Services Tax - a consumption tax imposed on the sales of goods and certain services in many countries including Malaysia. It is a key component of the country's taxation system and is designed to generate revenue for the government. SST is distinct from the Goods and Services Tax (GST), which it replaced in Malaysia in 2018. Hence, it is important for businesses who are compliant to collect and remit SST, to have a better understanding of what goods and services are subject to the tax to ensure accurate reports and remittances to the government.
According to the recent budget announced by the Prime Minister in October 2023, there is a proposed increase in SST by 20% which is from 6% to 8%. This change has been widely communicated and has been officially announced on MySST's official website which will take effect from 1st March 2024.
On a side note, the SST increase does not extend to Food & Beverages (F&B) services. However, we know that the hoteliers are still confused on this part, hence, further clarification is still needed especially for hotels that provide F&B services for events and meetings at the hotel.
The changes ahead are big for hotels in Malaysia, from various factors that affect the operations, finances, and guests' experience. Let's break down what this could mean, particularly in operational costs and pricing strategies, which may shape the course for the hotels.
We understand that the transition to updated SST rates may raise questions and concerns for both hotel owners and guests, especially on the bookings that you received before 1st March 2024 for the stay date on or after 1st March 2024. Hence, we created a flowchart below for your reference.
Disclaimer: This flowchart was compiled following the draft guideline shared by the Royal Malaysian Customs Department and is subject to change.
Here's what you need to know to navigate the transition seamlessly:
**NOTE: The above are based on the draft guidelines and verbal advice received from RMCD.
Now that we have explored the potential impacts, let's outline the strategic approach for hoteliers to proactively address these changes.
In summary, following the changes in SST percentage from 6% to 8%, hotel owners must take proactive measures. This means making smart decisions to not only handle the changes well but also to come out strong and flexible in a changing economy. By making thoughtful adjustments, hotel owners can still offer great experiences to guests while keeping the businesses financially healthy. The key is to be ready for changes, adapt, and stay resilient in the face of economic shifts.