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Industry Guide:

Accommodation Premises and Similar Establishment 

 
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FREQUENTLY ASKED QUESTIONS

Supplies of accommodation and other services

1. What is the GST treatment on rooms that are provided with furnished sleeping accommodation, spa, gym and laundry services to hotel guests?

Supply of room with furnished sleeping accommodation is subject to GST. Recreational facilities such as spa, masseur services, compact gym and laundry services are taxable supplies and subject to GST at standard rate. If services provided are not part of the room accommodation services, these services should be stated in a separate bill with the amount and GST charged indicated. If it is provided as part of the accommodation package, then these services are to be considered as a single supply for charging GST.

2. How is GST on telecommunication services such as facsimile, email/internet and IDD phone used by guests in their room or at the business center to be accounted for?

All these telecommunications services and service charge, if any, by the hotel are to be standard rated, except international calls which are to be zero rated.

3. Do we have to account for GST on parking facilities which are provided free of charge to the guests and how is GST to be accounted if discounts are given to those parking space that have a charge?

Parking facilities provided free of charge by the hotel are not subject to GST because normally it is inclusive of the room charges or rental of facilities. However, letting of parking space charged separately is subject to GST. If discount is given to everyone, then GST is charged on the discounted amount.

4. How is GST calculated on a wedding package offered by a hotel, which includes room and ancillary facilities?

The wedding package offered may consist of wedding breakfast, buffet and meals served in a room with ancillary services provided as part of the package (including floral decorations; the service of a toast master; a room for ceremony and bridal party). This package is treated as a single taxable supply. The calculation of GST must be based on the total value of this package. The GST treatment is the same for other similar packages like conferences, seminar and gatherings with ancillary services. 

5. In the promotion of new membership recruitment campaign, the hotel offers “Stay 6 Nights Get One Night Free” program to all who wish to join. Do we have to charge GST on the free night accommodation?

The free night offered as a package in a promotion campaign is treated as a discount and allowable. GST is chargeable on the actual amount paid.

6. Is the hotel club annual membership fees subject to GST?

Yes, the annual membership fees paid by members are subject to GST. It entitles the members to enjoy the hotel facilities with special treatment or discount.

7. Members of the hotel’s club enjoy certain facilities such as the gym and swimming pool at discounted rates. How do I account for GST on these services?

These services are taxable supplies and subject to GST. If discount is given for using these facilities, GST shall be accounted on the discounted amount

8. Is GST payable on hotel accommodation given free to regular customers? 

GST is not payable on free hotel accommodation offered to all customers. 

9. Is commission paid to promoters and hotel brokers subject to GST, and if so who should account for it?

Yes, commission paid to promoters and hotel brokers are subject to GST. The promoters and brokers are the marketing agent for the hotel. The service of the agent is a taxable supply and therefore the agent must account for GST if he is a GST registered person.

10. It is a common practice for a hotel to order bouquet of flowers or purchase gifts on behalf of customers at their request. The hotel will include this cost as separate charge in the invoice issued. Is this charge on the services of providing gifts subject to GST?

The supply of bouquet of flowers or gift is a taxable supply. If there is any charge on such services imposed by the hotel, such services are also subject to GST.

11. As a form of goodwill, the hotel pays the taxi fare on behalf of hotel guest. The hotel will recover the exact amount in the guest’s hotel bill. Is the recovery of taxi fare subject to GST?

Taxi fare is exempt from GST. The recovery of taxi fare by the hotel is not subject to GST as it is regarded as a disbursement. The tax if any (for limousine service which is taxable) would be borne by the hotel guest but paid by the hotel. The hotel is not entitled to claim input tax on the tax incurred. Fare paid on behalf of guest is treated as disbursement. The hotel need not charge GST on disbursement.

12. What is the GST treatment on complimentary rooms?

The supply of complimentary room as part of the hotel’s promotional package, for example, a complimentary room given under loyalty program, or as an offer for group package such as one complimentary room for every 20 rooms booked and is open to all is not subject to GST. It is treated as a discount. However, if the Complementary room is only given to business associates or connected person, it is subject to GST based on the room rate. In both cases, ITC is claimable by the hotel.

13. A hotel making extreme promotion package, charges RM1.00 per night stay as an annual event during school holidays. On what value should GST be charged?

GST is to be charged on the actual amount paid.

14. Is the supply of bed and breakfast (B & B) treated as a single supply?

The B & B establishment normally will include breakfast at an inclusive price. This is treated as a single supply and subject to GST.

15. Do I have to account for GST on in-house training given to hotel employee?

The in house training (employment related skills) given free to employees to improve their working skill is regarded as a non-supply and therefore not subject to GST. 

16. If my hotel provides training services to other hotel’s employees, do I need to account for GST on these training services given?

Yes, you have to account for GST on the fees paid for training services to other hotel’s employees. 

17. Are takings from coin-operated machines located in the hotel’s premise subject to GST?

Yes. The supplies of goods or services through any coin-operated machines, such as video game, vending machine or snack machines are subject to GST. 

The supplier of these machines must account for the total value of the coins/tokens removed from the machine, and GST is to be accounted for by applying the GST fraction, i.e. If GST rate is 6%:-

Output tax = GST rate x takings x takings 
                   GST rate + 100%

                = 6% x takings
                  (6% + 100%)

                = 6% x takings
                  106%

The time of supply is the date the coins/takings are removed from the machine.

18. What is the GST treatment on letting out hotel’s sports facilities, such as golf course and golf driving range?

Sports facilities are facilities used for sport or physical recreation which are normally designed or equipped premises or land for particular sporting activities. The letting out of such facilities is subject to GST at standard rate. 

19. What is the GST treatment on the disposal of a hotel’s business assets, for example disposal of used curtain and furniture?

The disposal of goods which form part of the business assets, by selling, giving them away or using them for private use, is a taxable supply. You have to account for GST on disposal of business assets based on the disposal value. 


Deposit, booking fee, retention fee and cancellation charge/fees

20. Is deposit charged as a security for payment of a supply which is refundable upon settlement of the hotel bill attract GST?

Such deposit is not treated as a consideration for the supply but merely as security, therefore it is not subject to GST. One example is when you check in into a hotel, settlement of hotel bill is to be made by credit card. You are asked to pay a deposit in cash of a certain amount that is refundable upon checking out from the hotel.

21. In the course or furtherance of my business, I may invite tenders for a future supply of goods and services. The person applying the tender will have to pay a deposit. Is the deposit subject to GST?

In this case, the deposit is taken as a security and not as a payment for supply which is eventually refundable, is therefore not subject to GST. 

22. What is the GST treatment on no show charge, if a hotel charge a customer on booking cancellation?

No show charge is subject to GST. It cannot be treated as penalty since the supply of room has been made to customer. 


Tips

23. Are tips given by guests voluntarily subject to GST?

A tip given voluntarily by guests or customers to a hotel’s staff as token of appreciation for services rendered is not part of consideration for the supply, and is therefore not subject to GST. However, if the tip is included in the customer’s bill as a mandatory service charge, then GST is chargeable. GST is to be calculated on the value of the supplies (customer’s bill) inclusive of the service charge.

Customer will have to pay GST on the supplies and also on service charge (normally at 10%).


Business entertainment expenses

24. As a hotel director, I usually entertain my clients by giving free lunch or drink. What is the GST treatment on this business entertainment? 

Free lunch or services given to any person who is not connected to you is not subject to GST.

25. A hotel operator engaged services of professionals such as interior decorator, architect, auditor and management consultant from abroad. Are these services subject to GST and who should account the tax?

Imported taxable services received by persons who belong in Malaysia in the course or furtherance of his business are subject to GST. The supplies are treated as made by the recipient and the recipient must account the tax by way of reverse charge mechanism. In this particular case, the hotelier must account for the tax and input tax is claimable.

(For further information please refer to the GST General Guide on Imported Services). 


Compensatory payment

26. A guest was charged for breaking the hotel tea pot. Is the charge subject to GST?

The guest will have to pay for the broken tea pot inclusive of GST. 


Time share accommodation

27. What is the GST treatment on the supply of holiday accommodations under a time-share scheme?

If you supply holiday accommodations under a time-share or multi ownership schemes, the supply is subject to GST.

28. Are other charges related to time-share package such as advance license fee for security, annual license fee for use of club facilities, annual maintenance fee, upgrading fee and administrative charges for transfer services subject to GST?

These charges are consideration for supplies related to time-share package. They are taxable supplies and therefore subject to GST. 

29. Time share offer owners the possibility to exchange their package to stay at one of the resorts worldwide. Most time share companies charge a transfer fee or surcharge. Is GST due on this fee? 

The transfer fee or surcharge is subject to GST because the fee is consideration for the transfer of services. 

30. The time-share membership entitled members to stay in the participating hotels/resorts within Malaysia or abroad. What is the GST treatment if members used the time share rights to stay in the participating hotels/resorts outside Malaysia? 

The time-share membership is a holiday/vacation package. It is a taxable supply and is subject to GST at the point of sale. However, purchase of room outside Malaysia by the time-share management to accomplish the request of members to use their time share right abroad is out of scope. On the other hand, purchase of room in hotels/resort in Malaysia by affiliate time-share management abroad for their time share members is subject to GST because the service is to be consumed in Malaysia.

31. Time share membership is open/sold to a non-resident. Is the sale subject to GST?

The supply of time-share membership by a taxable person is subject to GST, even though purchased by a non-resident. A supply of service is treated as made in Malaysia if the supplier belongs in Malaysia.

32. A time-share management in Malaysia does marketing/recruitment overseas. Is the time-share membership sold during the promotion subject to GST?

Yes, the time share membership sold is subject to GST because the timeshare package and the supplier belongs in Malaysia.

33. Time-share owners can elect to stay at their resort during the prescribed period. They can also sell or rent out their rights (e.g. one week stay). What is the GST implication on these transactions?

If you sell or lease your holiday accommodation (rights), your supply is standard rated. If you sell or lease the time-share rights through the timeshare management they must account for GST through. If you make your own arrangement you must account for GST if you are a GST registered person.

34. Does the redemption of goods and services under the time-share scheme reward point system subject to GST?

Redeemable reward points are subject to GST upon redemption.

35. What is the GST treatment on refund payment due to the cancellation of the time-share membership?

Refund for cancelled time-share membership is not subject to GST because it is not a supply, and any tax paid on the balance of membership fee is refundable. Time-share management must produce evidence of tax refunded to the member before claiming tax refund from the government.

36. GH group comprises of subsidiaries and associated companies on entertainment industry and resort chain. Is GH entitle for group registration and what are the benefits of group registration?

GH group is entitle to group registration if the company fulfil the following criteria:-
Group registration under the GST Act is a facility applicable only to subsidiary companies that make wholly taxable supplies. The group has to appoint a representative member to account for GST and claiming of input tax for the group. However, each member of the group is also required to be GST registered person before becoming a member of the group. The benefit is supply between members of the group is to be disregarded.

(For further information, please refer to the GST Guide on Registration) 


Other Related Issues

37. What is the GST treatment for service apartments? Is it treated as commercial accommodation or similar establishments (i.e. hotel, motel etc.) 

Service apartments such as hotel, motel are commercial accommodation and is subject to GST.

38. Are residential apartments packaged with other services such as 24 hours security, swimming pool, landscape and other common facilities can be classified as service apartments? Are these services subject to GST? 

Residential apartment does not become service apartment by providing services as classified above. However, when management fees charged for maintenance of the services are subject to GST. Security services provided is a taxable supply and the security company will have to charge GST on the security services provided to the management company. If the management company is a GST registered person the GST paid to the security company is claimable as input tax.

39. Service apartments are occasionally rented out as residential apartments to individuals or companies. Is the rent received subject to GST?

Service apartments operated by a GST registered company which collect rent on short/long stay is subject to GST. GST will be charged on the value offered by the hotel for long stay. If the apartment is sold to an individual for residential purpose, it is not subject to GST. The GST treatment on service apartments will depend on the usage of the apartments whether for commercial or residential purposes. If it is for commercial, it is subject to GST and if it is for residential, it is not subject to GST.

40. A company bought a turnkey residential project and converted it to service apartments. What is the GST treatment on these kind of service apartments?

Purchase of residential property is an exempt supply with no tax liability, but changing the status of residential property to commercial apartment attracts GST. Sales of the apartment becomes sales of a taxable supply
 
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