SST - Guide on Motor Vehicle Services Or Repair Centre

“Operator” means individual / business entity which provide either service or repair centre or both.

“Designated Areas” (DA) means Labuan, Langkawi and Tioman.

“Special Areas” (SA) means any free zone, licenced warehouse and licensed manufacturing warehouse and Joint Development Area.

Motor vehicle services (MVS) or repair (also known regionally as a garage or a workshop) is an establishment where motor vehicles are repaired by any person.

Charging Service Tax 

The rate of service tax shall be charged at the rate of 6%. Service tax on the MVS or repair will be charged only on cost of labour. Cost of spare parts is not subjected to service tax.

Service Tax Treatment

The taxable services includes: 

(i) Repair and engine tuning service; 

(ii) Change, adjust and install spare parts service; 

(iii) Balancing and alignment services; 

(iv) Body repair, knocking and welding services;

(v) Provision of Pre Delivery Inspection (PDI) services by a vehicle service centre belonging to a car dealership (separate entity); 

** In the automotive industry, a pre-delivery inspection is the final check carried out by the dealer on a car before they hand it over to you and includes various checks to ensure that the vehicle is up to a certain standard before it is presented to the purchaser.

(vi) The cementing and repainting services; 

(vii) Services on the trailer and tanker; 

(viii) Reimbursement on prescribed service by third party

Example 1 

A customer send his car to AB Workshop for repair and service which includes engine repairs, body repairs including knocking, welding and repainting. AB Workshop (registered person) however outsourced the painting job to ZC Painting Sdn Bhd. ZC Painting Sdn Bhd charged AB Workshop for the painting job and AB Workshop will recover the cost from his customer. 

The recovery of cost is subjected to service tax regardless there is a mark-up element.

(ix) Service for vehicle under warranty; 

(x) Manufacturer’s warranty; 

Example 2

Company A as a franchise holder provides MVS related to car sales agreement between Company A and overseas car manufacturers. 

Payments on manufacturing defects and service taxes are paid by foreign car manufacturers on behalf of customers.

Example 3 

Company B provides MVS related to car sales agreement between Company B and local car manufacturers. 

Payments on manufacturing defects and service taxes are paid by local car manufacturers on behalf of customers.

(xi) Labour cost on service by subcontractors. 

Example 4 

Vehicle service Co. A subcontracted to Co. B. 

The value of the Co. B’s services and the mark up (if any) by Co. A are accounted for taxable value.

Services that are not subject to service tax: 
(i) Free tyre balancing and alignment service when buying tyres; 
(ii) Service / maintenance of non-motor vehicle. For example aircrafts, vessels and trains; 
(iii) Vehicle services owned by registered person themselves for demonstration purposes (pilot test); 
(iv) Service made on buggy. Buggy is not categorized as motor vehicle; 
(v) Installation accessories such as audio/visual system, tinted film, alarm systems, power windows and central locking systems; 
(vi) Cost of spare parts;
(vii) Towing; 
(viii) Grooming i.e washing, waxing, polishing

Motor vehicle service and repair services within designated area (DA) is not subject to service tax.

Responsibility of Registered Person

A registered person is responsible to: 
(i) Charge service tax on taxable services, 
(ii) Issue an invoice and receipt to the customers in respect of any transaction relating to the provision of taxable services, 
(iii) Submit service tax return sst-02 electronically and pay service tax before due date, 
(iv) Keep proper records.

Frequently Asked Questions (FAQs)

Q : As a registered person, is selling the spare part to the customer subject to service tax? 

A : No, it is not subject to service tax.

Q : A registered repair centre in Kedah has a branch in Langkawi (DA) and is providing service in Langkawi. Is the service subject to service tax? 

A : The repair service is not subject to service tax if: 
(i) The services are performed directly in connection with vehicle 
(ii) The services are performed in DA and benefit the person in DA; and 
(iii) The invoice is issued by the branch in DA.

Q : PUSPAKOM is a vehicle inspection company. PUSPAKOM provides comprehensive types of inspection such as routine inspection, hire and purchase inspection, transfer of ownership inspection and others. Do PUSPAKOM need to charge service tax for its services? 

A : Yes, the services performed by PUSPAKOM are subject to service tax.

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Edited by: 浪子

Bibliography

Royal Malaysian Customs Department. (2018). Guide on Motor Vehicle Services Or Repair Centre. Retrieved from 
https://mysst.customs.gov.my/assets/document/Guide%20On%20Motor%20Vehicle%20Services%20Or%20Repair%20Centre.pdf

Wikipedia. (n.d). Pre-Delivery Inspection. Retrieved from 
https://en.wikipedia.org/wiki/Pre-delivery_inspection