Gst Case Study

With the implementation of the Goods and Services Tax (GST), the financial services industry will definitely get affected from certain aspects. The impact of the implementation of GST is significant on investment industry, especially fund management services. Fund management services are provided by the Unit Trust Management Company (UTMC) that licensed by the Securities Commissions (SC) which provide investment management services. Each fund is generally handled by a fund manager who responsible for conducting researches, providing investment advice, ensuring compliance with regulatory requirements as well as preparation of reports for their clients (Royal Malaysian Customs Department, 2013). Hence, the fund manager will charge management

In financial services industry, all fee-based activities, include various types of charges or transaction fees levied on a per unit or lump-sum basis, are generally liable to GST. Thus, fund-base activities are greatly affected as certain fees and expenses charged to the fund, such as the upfront fee, management fee as well as switching fee of the unit trust, are subject to GST at a standard rate. However, transactions such as buying and selling of a unit trust are exempted from GST.

Figure 1: The implementation of GST on a unit trust fund. Source: Royal Malaysian Customs Department, 2013

The standard rate of GST is currently fully charged on the investors. Hence, the investors are required to pay more for the same amount of investment after the implementation of GST. The example of the difference on cost is shown in Table 1 with an initial investment of RM 10,000 in a unit trust.

Table 1: Difference on cost before and after the implementation of GST.

Without GST With GST

Upfront Charge (5%)

= RM 10,000 x 5%

= RM

Yet, it might stimulate the whole sector along with an economic growth afterward. Generally, GST implementation is deemed to have no adverse effects on equities in the long run. The implementation of GST provides a reliable source of national income and stimulates the growth of manufacturing industry in Malaysia. This will eventually attract the foreign investors to invest in Malaysia which create a constant cash inflow to the country. The economy growth will be significant which benefit to the financial services