SEPANG (March 4): The proposal to retain the 6% service tax on domestic flights will be discussed in this week's Cabinet meeting, said Transport Minister Anthony Loke Siew Fook.
He said the Ministry of Transport will discuss the matter with the Ministry of Finance (MOF) since the tax issue falls under the MOF's jurisdiction.
“The service tax is applicable to air tickets. I will discuss with the MOF to see whether we can maintain that tax at 6% for domestic travels," Loke told the media after launching AirAsia fixed fares in conjunction with Hari Raya Aidilfitri here on Monday.
Loke said the matter will be brought up for discussion in the Cabinet meeting expected to be held on Friday.
The service tax was increased to 8%, effective from March 1, compared to the previous 6%.
However, the new rate is not applied to services for food and beverages, telecommunications and parking.
The increase to 8% was announced in the tabling of Budget 2024 in October last year, as part of the government's efforts to increase the country's financial resilience, while reducing the budget deficit.
Meanwhile, Capital A Bhd chief executive officer Tan Sri Tony Fernandes said maintaining the service tax at 6% for domestic travels should be considered, as the industry had just recovered post Covid-19, and tourism also plays a big part in the country's economy.
He said the government should also look at maintenance, repair and overhaul (MRO) organisations, as it would become a huge business.
He hopes the government would support local MRO organisations in their efforts to catch up with Singapore.
"MRO [firms] can be a very big job creator in this part of the world. We hope that apart from the service tax, the government will look at MRO organisations that are big employers and contributors to gross domestic product," Loke said.
In conjunction with Aidilfitri, AirAsia is offering more than 22,000 seats at fixed low fares for late night flights between Peninsular Malaysia and Sabah and Sarawak.
The fare is fixed at RM298 one way to Sarawak, while to Sabah, it is RM348 one way.
Flights for the promotional fares can be booked from now until April 17 on the airasia.com website, or the AirAsia MOVE app.