JOHOR BARU, MALAYSIA - Stern action will be taken against restaurants in the state that charge customers service tax, even after being exempted from paying it.

Johor Customs department deputy director Ishak Ahmad said restaurant owners who flouted the law faced court action under Section 29 of the Service Tax Act 1975 which carried a RM5,000 fine, two-year imprisonment or both.

'We will monitor the restaurants,' he told reporters yesterday after launching a ceremony to cancel the service tax licences for qualified restaurants.

He advised the public to look out for the no-service-tax-licence notice when they go to any eatery in the state, adding that 636 outlets in Johor (with annual sales of less than RM3mil) had been exempted from applying for the licence.

He said the new ruling, which went into effect on July 1, meant customers need not pay the 5% service tax when eating at these outlets.

'The ruling is expected to cost the Government RM39mil in revenue annually.'

Complaints against any restaurant can be forwarded to the Customs hotline at 07-2202044 or via e-mail to cd@customs.gov.my