Did You Know There Is an 8% Service Tax on Alcoholic Beverages? 

Many Food and Beverage (F&B) businesses in Malaysia are still unknowingly applying the wrong Service Tax rate on alcoholic beverages — and this has become a key focus area in audits by the Royal Malaysian Customs Department (RMCD).

In Malaysia, Service Tax registered persons under certain taxable service group are required to charge Service Tax on alcoholic beverages supplied to customers.

Under Service Tax Policy No. 3/2024 (Amendment No. 1), alcoholic beverages supplied by registered taxable persons are subject to 8% Service Tax, depending on the relevant taxable service group. 

This update is part of the Service Tax enhancement framework effective from 1 March 2024, following the increase of Service Tax rate from 6% to 8% on most taxable service in Malaysia. 

Service Tax Rate on Alcoholic Beverages (Who is affected?) 

An 8% Service Tax applies to alcoholic beverages provided by registered persons in the following groups: 

• Group A – Accommodation
• Group B – Food & Beverage (restaurants, cafés, coffee houses, bars, etc.)  
• Group C – Night-Clubs, Dance Halls, Cabarets, Karaoke Centre, Wellness Centre, Massage Parlours, Public Houses and Beer Houses
• Group D – Private clubs
• Group E – Golf clubs and golf driving range

Common Issue Identified in F&B Industry (RMCD Audit Finding) 

In practice, some Group B (Food & Beverage) operators still apply 6% Service Tax on the entire bill, including alcoholic beverages. 

However, under the current rules: 

• Food & non-alcoholic items → 6% Service Tax
• Alcoholic beverages → 8% Service Tax

This mismatch often leads to under-declaration of Service Tax on alcoholic beverages, especially where billing systems are not configured to separate item category. 

Is This a Correct Service Tax Treatment Bill?

Background of the Case (Customs Audit Scenario)

(This article is prepared for illustrative purposes only. The facts have been generalised and anonymised to preserve confidentiality. All client information is treated as Private & Confidential (P&C) in accordance with professional standards.)

Let’s look at a typical real-life scenario. 

A Group B registered restaurant, offering quality cuisine in a casual dining environment, continued to charge 6% Service Tax on the full bill, including alcoholic beverages. 

During an audit, the Royal Malaysian Customs Department (RMCD) identified the issue and reclassified the alcohol portion.

Additional Service Tax was imposed for the following periods:

• July 2024 – August 2024 
• September 2024 – October 2024 

As a result, RMCD recover underpaid Service Tax amounting to RM1,300 from the restaurant. 

In addition, the taxpayer was required to perform a Voluntary Disclosure (VD) computation for other affected periods, meaning the business had to self-assess and compute the under-declared Service Tax. 

Service Tax Adjustment Computation Illustration: 

Now, let’s put this into perspective: 

• If the adjustment covers 4 months → RM1,300  
• If extended to 12 months → RM3,900  
• If extended to 3 years → RM11,700  

👉 What seems like a small billing mistake can quickly turn into a significant financial exposure, and these additional costs are borne directly by the business owner. 

Additional Clarifications from Service Tax Policy No. 3/2024 (Amendment No.1) 

RMCD has further clarified the following treatment: 

(1) Alcohol in buffet or banquet packages 

Alcoholic beverages included in a set package (buffet or banquet) are subject to 6% Service Tax, as part of bundled F&B services.

(2) Corkage fees

Corkage fees are subject to 8% Service Tax.  

(3) Snacks and fruits 

Snacks, fruits, or similar items are not subject to Service Tax if not part of prepared/served F&B service. 

(4) Service charge 

Service charge imposed by restaurants is not subject to Service Tax.

Where Does the 8% Service Tax on Alcoholic Beverages Apply in Malaysia? 

To make things clearer, here’s a simple comparison of when the 8% Service Tax on alcoholic beverages in Malaysia applies: 

Scenario	Service Tax Treatment
Restaurants, cafés, bars	8% Service Tax applies
Hotels & accommodation	8% Service Tax applies
Golf clubs & private clubs	8% Service Tax applies
Nightclubs	8% Service Tax applies
Supermarkets	No Service Tax
Convenience stores	No Service Tax
Retail liquor shops	No Service Tax
Duty-free outlets	No Service Tax

💡 Simple Takeaway 

• Drink at a restaurant 🍷 → 8% Service Tax applies  
• Buy from a supermarket 🛒 → No Service Tax 

Need Professional Advice on Service Tax Compliance? 

If you are operating in the Food and Beverage industry in Malaysia, it is important to regularly review your billing system and Service Tax treatment to ensure compliance with RMCD requirements. 

We can assist you by:

• Providing cost-effective training to your operations team using practical, real-life tax scenarios
• Keeping you updated on the latest developments in direct and indirect taxes in Malaysia through remote training session

If you require clarification or assistance, feel free to contact us via WhatsApp. We are ready to support your business in maintaining Service Tax compliance and audit readiness in Malaysia.