Friday, September 9, 2011

6% tax on prepaid lines


PETALING JAYA: Prepaid mobile phone users will have to fork out 6% more from Sept 15 as telcos say they will no longer absorb the service tax which was introduced in 1998. (Since 1998??? Are You Sure???). The service charge will now be imposed on purchases of prepaid reloads and prepaid starter/SIM packs.

In a joint statement, the telcos said the move was to ensure prepaid services remained competitive compared with postpaid, given the high prepaid rates for calls and SMS at its onset.
“With prepaid rates progressively reduced over the years, it is currently offered at very competitive rates,” said the statement.

With the move, a customer who buys a RM10 prepaid reload will need to pay RM10.60, the RM0.60 being the service tax.

Prepaid users make up the majority of customers in all telcos in Malaysia.The latest statistics, according to sources in the respective telcos, show that DiGi has approximately 7.7 million prepaid customers, accounting for 83% of its total customer base of 9.3 million, while Celcom has approximately nine million prepaid customers (77% of 11.7 million) and Maxis has 9.5 million prepaid customers (74% of 12.8 million).

The statement also said the service tax was a consumption tax and chargeable to the customer, as provided for in the service tax laws.

The Service Tax Act 1975 requires telecommunication companies to levy service tax at the prevailing rate on telecommunication services, including mobile prepaid services.
This is similar to the service tax levied on food and beverage purchases from restaurants and hotels. The service tax was raised from 5% to 6% effective January 2011.

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