As announced during the tabling of Budget 2024 last October, the government has increased the rate of the service tax (SST) from 6% to 8%, effective from today, March 1, 2024. There are a few categories that are excluded from the new rate, including F&B, telecommunications, water and vehicle parking, but in general, consumers are set to pay more as a result of the hike.

Vehicle maintenance – service and repairs to pay new 8% SST rate

In the automotive domain, vehicle servicing and repairs are not placed in exempted categories under the revision, and so vehicle maintenance is now set to cost more as a result of the increase. While the service tax in this case is applied only on labour charges and not on parts and items, motorists will still see an increase in their overall vehicle servicing costs from today, marginal though it may be.

Motor vehicle insurance – service tax increased to 8%

Another unavoidable increase for motorists comes in the form of motor insurance, as all business-to-consumer general insurance or takaful, excluding medical insurance or medical takaful, is subject to the new 8% service tax rate.

Earlier, it was intimated from insurance providers that the tax would also be applied partially on existing policies, where for example, a policy with a coverage period from July 2023 to June 2024 would see the duration of coverage from March 1 to the end of the coverage period in June being subject to the service tax increase.

Based on the latest information, this is not going to be the case, with motor vehicle policies – which are paid in full – up to February 29 paying the old rate of 6%, with no further revision applied on these. Of course, starting from today, all motor vehicle insurance policies will be subject to the new 8% rate, charged on the actual premium paid, which means it is calculated on the sum after NCD – if any – is applied.

Car rentals to pay new SST rate – EV charging at home to cost more

Elsewhere, car rental and driver services are also subjected to the increase to the 8% service tax rate, while the new SST rate will also affect electricity bills for a segment of consumers, being applied on energy usage exceeding 600 kWh, meaning that those who already pay more than RM232 per month can expect to pay more for that utility bill.

For electric vehicle owners, this will have a knock-on effect on the price of charging their EV at home, given that doing so is likely to increase the energy consumption above the 600 kWh threshold. As it is with vehicle servicing and motor insurance (the latter, in most cases), the increase is marginal, but it is still an increase in expenditure, especially when viewed collectively.

The 8% SST, expected to generate RM3 billion in additional revenue for the government, is said to be part of tax reforms aimed at strengthening the country’s fiscal foundation.

Looking to sell your car? Sell it with myTukar.