Amendments to the Goods and Services Tax (GST) Act and Regulations: What Businesses Need to Know
Significant changes have been introduced to the Goods and Services Tax (GST) Act through the 7th Amendment (No. 20/2024) and regulations (No. 2024/R-116), bringing updates that will impact businesses, particularly in the tourism sector. These changes include a revised Tourism Sector GST (TGST) rate and categorization changes to staff cafés operated in Tourist Establishments exclusively for staff. Here’s a detailed breakdown of the amendments and their implications for your business.
1. Increase in Tourism Sector GST (TGST) Rate
One of the most notable changes is the
increase in the TGST rate from 16% to 17%, effective from
1 July 2025. This adjustment applies to all goods and services provided within the tourism sector. Businesses in this sector must update their pricing structures and accounting systems to reflect the new rate and ensure compliance.
The
time of supply determines when GST becomes applicable for the supply of goods or services. The time of supply is the
earlier of:
- The date the tax invoice is issued.
- The date payment is received for the goods or services.
Determining the correct time of supply is essential to identify the applicable tax rate for a transaction. This ensures that businesses accurately account for GST liabilities, apply the correct rate, and avoid penalties for non-compliance.
2. Changes to GST rate applicable to Staff Cafés
The amendment introduces new rules for
staff cafés operating within tourist establishments:
- GST Rate Change: Goods sold and services provided in staff cafés are now categorized under the general sector, attracting a GST rate of 8%. Previously, only staff shops were included in the general sector.
- Registration Requirements: Staff cafés must be registered as a separate activity. However, if the same person operates both the staff shop and staff café, they can be registered together for simplicity.
- Anti-Avoidance Provision: To prevent tax avoidance, MIRA has the authority to charge the TGST rate (17%) if it determines that staff cafés are being used to circumvent the higher tax rate. This provision aligns with existing rules for staff shops.
In light of these changes, it is important for tour operators, resorts and guesthouses in the Maldives Tourism sector to prepare proactively to navigate the changes smoothly.