Do you know that ITS providers with >RM500K annual turnover need to charge Service Tax?
SERVICE TAX: INFORMATION TECHNOLOGY SERVICES
One type of service that is becoming increasingly familiar is Information Technology Services (ITS). As technology has become more and more synchronous in our daily lives, a portion of our money is inevitably spent on such services.
Under Item 8, Group G, First Schedule, Service Tax Regulations 2018, ITS is a taxable service. Information technology service providers who have a total turnover for a period of 12 months in excess of RM 500,000
must be registered under the Service Tax Act 2018 and charge service tax on the provision of taxable services to their customers.
Scope of Taxable Services
Provision of all types of information technology services includes distributing or reselling information technology services on behalf of any person. Take note that the expansion of the scope is as per Service Tax Policy No.1/2020.
ITS include services associated with the following:
Computing services
Coding & programming
Application development
Software development
System integration
Web development
Online platforms (Effective 1/1/2020, this is considered a taxable service under Group G, Item 12, First Schedule of the Service Tax Regulations 2018.)
Networks integration
Data processing, administration
Cloud services
Artificial Intelligence
Internet of Things
Examples of Taxable Services
Looking at the scope, you might wonder what exactly is covered. Let us give you a non-exhaustive list of some definite examples here.
Provision of software by the software developer.
Services relating to the development, customisation, or provision of a computer system.
Installation or setting up of computer system, where the service is not part of a purchase of hardware.
Installation of software into hardware where the service is not part of a purchase of hardware.
Software support and maintenance.
Periodic payments, subscriptions, or maintenance for continued use and updates on website-related services, for instance, the maintenance of a webpage.
Updating to a new version, upgrading or modification of data, system, or software.
It seems like everything is pretty much covered already, doesn’t it? Well, that is not true. There are actually some non-taxable services in relation to ITS. Would
you like to know more?
Sign up for TaxPOD, and find out which type of ITS is considered non-taxable.
