KUALA LUMPUR: The Goods and Services Tax (GST) has been implemented for almost a month now, but there are still many issues raised that need to be resolved.
With the introduction of the GST at six per cent on April 1 this year, the sales tax rated at 10 per cent and service tax (six per cent) has been abolished.
The implementation of the GST is part of the government’s tax reform programme to enhance the capability, effectiveness and transparency of tax administration and management.
However, along with the implementation of the new tax system, there are many issues raised that need to be addressed, including regarding the service charge.
Some might not be aware that the service charge has nothing to do with the authorities. It is an element left unregulated since it was introduced in the 1980s to replace tipping, which was problematic to customers and unfair to behind-the-scenes staff who did not get to serve customers directly and thus were unable to receive tips.
While generally customers did not seem to object to paying it, there have been abuses, like some establishments not notifying customers that their prices were subject to a service charge, which appeared in the final bill like a hidden cost to customers.
And some establishments did not pass on service charge collections to their employees. This goes against the spirit of having the service charge, and can be described as ‘stealing’ by the business owner or manager.
With the introduction of the GST, the matter has become even more problematic as the public resent being charged twice, for example the service charge followed by the GST.
Some customers erroneously think the two charges are imposed by the government. Consumers have also raised the question as to why they are forced to pay extra for service even when the service is poor.
Business owners, labour unions and some political parties want the service charge to stay as it supplements the low pay of many workers in the service and hospitality industries.
The government is mulling prohibiting the imposition of the service charges altogether on the grounds that many businesses seem to be able to do well without it.
However, it seems to have aroused protests as the majority of food and beverage and hospitality outlets do not have unionised employees and thus do not have Collective Agreements.
A possible solution is closely related to the issuance of business licences, because the ability of businesses to impose the service charge is tied to the issuance of the business licence.
The business licence may be issued on two conditions: firstly, the business agrees to prominently display a sign or signs that it will levy a service charge (no matter what percentage) such that the prospective customer will see it even before entering the premises.
Secondly, a signed declaration by the business owner or authorised manager that the service charge collection is to be passed on to employees should also be displayed on the premises for the benefit of customers and employees, doing away with the need for Collective Agreements.
The local authority by-laws for the issuance of business licences can be amended to accommodate these conditions. Since business licences are issued by local authorities, the work is de-centralised away from a federal ministry, thus relieving it of such an onerous task.
The above solution seems a worthy one, as it allows businesses to levy a service charge (of whatever percentage) if they choose to, and prospective consumers, who get sufficient notice about a premises’ service charge, may choose not to patronise it. --BERNAMA