RESTAURANT food is supposed to be exempt from the upcoming sales and services tax.

But going by the SST’s proposed guidelines, this may not be so when it comes to eating out, said SME Association president Michael Kang.

“There are restaurants and hawker centres making more than RM500,000 a year. And under the SST rules, they may have to charge a 6% service tax,” he said, without specifying the kinds of restaurants under this category.

But it is understood that they include fast-food outlets, such as McDonald’s, KFC and Burger King, as well as big local chains Old Town White Coffee and Secret Recipe.

Certain Indian Muslim restaurants and food courts, too, may charge SST.

Kang said the rule of thumb is that if a restaurant used to charge the goods and services tax, it will likely charge SST come September 1.

These outlets levied a 6% tax under the GST system as they earned more than RM500,000 in annual sales. The SST uses the same sales threshold.

According to the Customs Department, restaurants are among the service providers required to charge SST.

Other services that will charge SST include cable television, mobile-phone service, vehicle repair, hotel and insurance.

Besides a flat rate of 6% for services, an SST rate of either 5% or 10% will be levied on manufacturers and importers of certain goods.

The government has said some 68,000 businesses will charge SST, compared with the 400,000 that charged GST.

Kang said it remains unclear whether manufacturers of processed food will charge SST.

This is because the tax is imposed on manufacturers, but almost all fresh and processed food is exempt.

“Take fish balls, for instance. Fish is exempt, but what if you manufacture fish balls?” said Kang.

He expects the government to collect more than its goal of RM21 billion through SST because of the RM500,000 threshold for service providers.

“We expect the SST collection to top RM30 billion. Under the old SST system, there were different thresholds, and some service providers did not have to charge SST.

“But this new SST is different and has a wider effect.” – July 25, 2018.