Recently, there have been some significant changes in service tax regulations. Among these changes, one of the major changes is the inclusion of maintenance and repair services as part of the taxable services under Group G, effective from 26 February 2024. This expansion, which came as a surprise to many, was not mentioned in the budget announcement, leading to confusion across various sectors.
Therefore, we are here to provide you with an overview of these changes, ensuring you are aware of them. It is widely known that the provisions of management maintenance services are one of the
taxable services subject to service tax since September 2018, and was initially categorized under item 9 Group G of the First Schedule to the Service Tax Regulations 2018. However, with the recent changes in service tax regulations, the classification of management maintenance services has been revised. These services are now reclassified from item 9 to item 13 – a brand new category within the same group where the scope of taxable services has also been expanded. Definition of Maintenance and Repair Services With the expanded scope of taxable services, understanding the definition of repair and maintenance services
is crucial for determining whether the services provided are subject to service tax under the new regulations. Generally, maintenance refers to activities carried out by service providers to preserve, maintain, operate, regulate, prevent, restore, or manage a building, goods, land, or system to ensure they function properly and effectively. On the other hand, repair services refer to activities of repairing, fixing, or restoring a building, goods, land, or system that is damaged, not working, or requires maintenance. Moreover, the guideline also
specifically stated that activities relating to the category of Maintenance and Repair Services include but are not limited to calibration, adjustment, recondition, reconfigure, or overhaul. In
addition, the guide also specifically describes the existence of the two types of maintenance services under the expanded scope of taxable services: preventive maintenance services and corrective maintenance services. Preventive Maintenance Services and Corrective Maintenance Services Preventive maintenance services are maintenance activities designed to prevent damage from occurring and these maintenance services are performed on a routine, scheduled, or periodic basis. In contrast, corrective maintenance or repair services are performed on an emergency, ad-hoc, upon
request, or unscheduled basis. It involves the process of returning a product to its original condition or better by replacing the damaged item or improving the existing specifications. Previously,
only preventive maintenance services fell under the purview of service tax. However, with the introduction of the latest service tax regulations, corrective maintenance services will now be included in the scope of taxable services and subject to service tax. This indicates that both preventive and corrective maintenance services are now subjected to service tax. However, the following services are
exempted: - Maintenance management services related to land or buildings for residential use provided by any developer, joint management body (JMB), management corporation, or residential association; or
- Repair services for residential buildings.
Overall, it is worthwhile to note that the inclusion of
maintenance and repair services as taxable services will have far-reaching implications for many businesses. Businesses providing taxable services need to comply with the service tax regulations, including registration, submission of service tax returns, and other compliance aspects to avoid penalties. |
