Malaysian tourism players to adjust rates to accommodate service tax increase

Travel package prices in Malaysia are poised to rise in the upcoming months due to the recent increase in service tax rates, which have surged from six to eight per cent as of March 1, affecting all taxable services.

Zahira Tahir, founder and CEO of Universal Holidays, noted that some hotels have already begun applying the eight per cent service tax rate, while most hotels will implement it during the new contracting period starting April 1. She added that her company will also raise rates by two per cent from next month onwards to offset what suppliers are charging them.

Travel agencies in Malaysia will soon increase their package prices to cater for the rise in service tax; Kuala Lumpur, Malaysia, pictured

Bobby Eng, general manager of Overseas Tours and Travel, mentioned that while his hotel partners are still imposing the six per cent tax, coach vendors and restaurants are now charging the company the revised amount.

Despite this, Eng stated that since they bill clients in foreign currencies like the Hong Kong dollar, Singapore dollar, and the US dollar – and given the weakened ringgit against these currencies – they can still manage to absorb the costs. “For new quotations starting this month, we will be adjusting the package rates by two per cent.”

Expressing concern, Arokia Das Anthony, executive director of The Essence of Asia Tours and Travel, highlighted that the increase in service tax rates could discourage potential tourists from visiting Malaysia.

He stated: “We operate in a fiercely competitive environment where every dollar counts. We cannot afford to lose business to Thailand, Indonesia, or Vietnam. We need to engage in negotiations with our vendors and reassess pricing strategies. Additionally, we must explore innovative ways to enhance the customer experience without inflating costs.”

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