GST only on annual credit card fee, no more service tax, says report

The service tax on credit cards will be abolished and the Goods and Services Tax (GST) will only be imposed on the annual fee charged by banks on credit cardholders, The Star Online reported today.

The portal quoted the Association of Banks Malaysia executive director Chuah Mei Lin as saying that the service tax imposed by the government since 2010 – at RM50 on the principal cardholder and RM25 on each supplementary card – will be abolished come April 1.

Instead, GST at 6% will only be imposed on the credit card annual fee charged by banks, and even then some banks may waive the annual fee upon request.

"In such cases, there will be no GST payable," The Star Online quoted Chuah as saying.

The portal also quoted Customs Department GST director Datuk Subromaniam Tholasy as saying that the abolition of the RM50 service tax would benefit cardholders as they would only have to pay the 6% on the annual fee.

“For example, if an annual fee of a platinum card holder is RM500, then the cardholder will only need to pay RM530 (RM500 + RM30, which is the 6% tax).

“The RM30 is obviously a lesser amount compared with the RM50 service tax,” he said.

Other banking sources told The Star Online that the GST on the annual fee might vary from RM53 to RM500, depending on the type of card, but that cardholders could only use their loyalty points or rebates to offset the 6% tax.

The new consumption tax would not be imposed on late payment charges and finance charges, Chuah was also reported as saying.

Late payment charge refers to the charge when the cardholder fails to pay at least the minimum monthly payment by the due date while finance charges are charges imposed on the cardholder on the outstanding balance that has not been settled on or before the payment due date.

GST will also not be imposed every time consumers swipe their credit cards.

“GST is not chargeable when swiping a credit card to make payment.

“For example, if you eat at a restaurant which is registered for GST, and the bill comes to RM50, you will be charged 6% GST on the total bill. So the amount you have to pay would be RM53 after GST.

“If you choose to pay for the bill using your credit or debit card, you will not be charged a further 6% on top of the RM53,” she said was quoted saying. – March 23, 2015.