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Are F&B operators required to charge Service Tax?
Service Tax: Food and Beverage
Did you know? Food and beverage (F&B) operators who have reached the prescribed threshold of having a total turnover in excess of RM1,500,000 for a period of 12 months must be registered under the Service Tax Act 2018, and they must charge service tax on the provision of taxable services to their customers. The provision of prepared or served food or drinks is a taxable service under Group B, First Schedule of the Service Tax Regulations 2018 (STR).
Taxable Persons
An F&B operator is defined as:
- Any person operating a restaurant, bar, snack bar, canteen, coffee house, or any place which provides food and beverage, whether wholly or partly eat-in or takeaway excluding a canteen located in an educational institution or operated by a religious institution or body.
- Any person providing catering services.
- Any person operating a food court including any eating place which is centrally managed with a common cashier system and where two or more persons provide food and drinks.
Taxable Services
“Taxable services” means services provided by F&B operator for the provision of:
- preparing and serving of food and beverage
- any other taxable service specified in other Groups in the First Schedule of the STR
- other services other than services of rental of space within the food and beverage establishment
- sale of beverages
Definition of F&B Establishment (FBE)
It refers to an area where F&B preparation services are prepared and served under the control of the F&B providers. It can include restaurant entities operating within a hotel or a commercial building such as a supermarket. The FBE is the area under the control and operation of the restaurant’s operator only and not the whole hotel or commercial building.
Places Where F&B Services Need to Be Charged Service Tax
1. Restaurant or similar FBEs
A restaurant is a place where people acquire services for meals that are prepared and served on the premise or to be eaten elsewhere. A place providing food or beverage can be considered a restaurant if it has the characteristics of a place to enjoy food or drink including:
- An area in FBE for food or beverage preparations;
- Tables and chairs in FBE for customers to eat and drink;
- Food or beverage menu for customers to make orders according to their preferences;
- Provide dining facilities such as spoons, garnishes, sauces, and more;
- Waiter or employee who takes orders from customers;
- Waiter or employee serves the food or beverage ordered;
- Customers do not need to prepare the food or beverage by themselves; and
- Customers can choose to either eat-in in the FBE or take away.
2. Catering Services
Catering services can include the activities of coordination, preparation, delivery, and serving of food and beverage to customers for any event, venue, or other person either within the FBE or outside the FBE.
3. Food Court
A food court is generally a common area within a facility that is set apart for food concessions. The food court operator provides space for F&B customers as well as space for F&B providers to prepare or serve food and beverages. Food court operators usually provide a centralised payment system.
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