Retail association calls for deferment, review of service tax on utilities bills

KUALA LUMPUR (Aug 3): The Malaysia Retail Chain Association (MRCA) is calling on the government to defer and review the imposition of services tax on utilities billed to commercial tenants through shopping mall management.

In a statement on Saturday, MRCA said the move to impose a 6% service tax on electricity, water, chilled water supply and other recoverable utilities, and ancillary charges paid by commercial tenants to mall management could result in double taxation and create an unequal playing field in the retail industry.

The association said its members received circulars from shopping mall managements in early July informing them that following the Guideline on Rental or Leasing Services (Version 2) issued by the Royal Malaysian Customs Department (RMCD) on May 14, a 6% service tax would be levied on tenants’ utility bills with retrospective effect from July 1.

MRCA said utility charges collected by mall operators and commercial landlords are pass-through costs recovered solely on a reimbursement basis, with service tax already imposed at the utility provider level.

“Imposing an additional service tax on commercial tenants merely inflates operating expenses without generating extra economic value or enhancing productivity. Ultimately, these compounding costs risk being passed on to consumers, indirectly driving up the overall cost of living,” said MRCA in the statement.

It urged the government to suspend the ruling and call for urgent engagement with the officials from the Ministry of Finance and RMCD to find a practical solution.

With retailers already grappling with escalating overheads, said MRCA, it will leave them with little to no margin to absorb additional tax expenses.

MRCA noted that a joint memorandum was submitted to the RMCD on June 25 by a coalition of eight major trade associations seeking a dialogue.

The eight co-signatories comprise the BBKLCC Tourism Association, Building Management Association of Malaysia, Bumiputra Retailers Organisation, Malaysia Retailers Association, MRCA, Malaysian REIT Managers Association, Malaysia Shopping Malls Association, and Small and Medium Enterprises Association.

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