6% service tax on prepaid reloads and starter packs

KUALA LUMPUR: Those buying prepaid reloads and prepaid starter/SIM packs will be charged a 6% service tax from Sept 15.

Prepaid customers would be informed via SMS beginning Thursday about the new service tax, the Malaysian telco industry said in a joint statement here.

Customers can also refer to the respective telcos' websites for details or contact the customer service centres if they have further queries.

The telcos said the service tax is a consumption tax and chargeable to the customer, as provided for in the service tax laws.

The Service Tax Act 1975 requires telecommunication companies to levy service tax at the prevailing rate on telecommunication services, including mobile prepaid services.

This is similar to the service tax levied on food and beverage purchases from restaurants and hotels.

Whilst service tax on prepaids is not new, the telcos have been absorbing it for mobile prepaid services since the introduction in 1998.

The move taken is to ensure mobile prepaid services remain competitive compared to the postpaid, given the high prepaid rates for calls and SMS at its onset.

With prepaid rates progressively reduced over the years, it is currently offered at very competitive rates. “With the six per cent service tax on prepaid services, a customer who purchases a RM10 prepaid reload will need to pay RM10.60, with the 60 sen being the service tax,” the statement said. - Bernama