Expanded SST will not affect basic services, say banking associations

PETALING JAYA: Banking associations have reassured the public that the upcoming expansion of the service tax which on July 1, 2025, will not affect commonly used basic banking services.

“Basic banking services that involve fees or commissions such as those related to current accounts (cheque accounts), savings accounts, or similar accounts, including e-wallets, are not subject to service tax,” the Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (Aibim) and the Malaysian Investment Banking Association (Miba) said in a joint statement on Thursday (June 26).

These services include fees imposed on cash deposits, withdrawals, payments, or local fund transfers; issuance of debit cards and subsequent annual fees; basic transactions done at bank branches or ATMs such as bill payments, printing of current or savings account statements.

“These are considered essential banking services and remain out of scope for service tax purposes. In addition, the annual fee imposed on the creditor charge card will also be excluded from service tax. Interest or profit and penalties or other punitive charges will not be subject to service tax.

“The above exclusions are intended to ensure that day-to-day banking activities for individual consumers remain unaffected by the service tax expansion,” read the statement.

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The expanded service tax scope for financial services will apply to fund management, investment and merchant banking related services, and trade financing related services.

Under Phase 1 of the expanded service tax scope, which comes into effect on July1, service tax will apply only to selected treasury, corporate and investment banking services.

“All banks under ABM, Aibim and Miba are committed to being transparent. Where service tax applies, charges will be clearly shown, and customers will be clearly informed,” they said.

Customers unsure of the impact of the expanded tax scope and need further clarification are urged to contact their banks directly.

“We appreciate the public’s attention to this matter, and we remain committed to open communication with customers. The banking industry will continue working with relevant authorities to ensure this transition is handled clearly and responsibly,” they added.

This statement comes as a further explanation to a June 25 statement by these associations.

They said service tax would be imposed at a rate of 8% on fee- and commission-based financial services.

“We wish to assure banking customers that several exemptions and exclusions have been granted, such as basic banking services for the rakyat, including current and savings account-related charges, which will remain not subjected to service tax for both conventional and Islamic banking services,” they said.