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GEORGE TOWN (July 23, 2008) : Customers patronising a non-hotel restaurant whose total sales is not more than RM3 million a year are no longer required to pay service tax.

This is because the government has abolished the requirement for such restaurants to pay service tax effective July 1.

All restaurants operating outside hotels were previously required to pay the tax if their individual sales over 12 months exceeded the threshold of RM500,000.

State Customs Department director Matrang Suhaili said today that the threshold has now been increased to RM3 million.

"All restaurants whose individual sales values are below RM3 million can apply to cancel their respective service tax licences," he said, adding that the licences must be handed over to the Customs office.

"It also means that these restaurants can no longer charge service tax to their customers," he said after officiating at a ceremony where selected restaurants handed in their service tax licences at the Customs office here.

Customers who are charged service tax by restaurants that are now exempted can complain to cd@customs.gov.my or call 03-88822605/10.

Matrang said however that restaurants in hotels are still required to pay service tax of 5% regardless of their sales amounts.

Restaurants in hotels with 25 rooms or less are only required to pay the 5% tax if their sales values exceed RM500,000 per year.

Matrang also noted that the state Customs would incur losses worth RM7 million a year with the new policy.

As of June, there were only seven restaurants in the state with annual sales above RM3 million.

Under the Service Tax Act 1975, failure by such restaurants to obtain service tax licences can result in a fine of up to RM5,000 or imprisonment of up to two years, or both. They can also be compounded up to RM5,000.

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