Govt to rake in extra RM6.6b from GST

PETALING JAYA: The implementation of the Goods and Services Tax (GST) by the government is expected to rake in additional revenue of RM6.6 billion for 2015 despite the significant expansion in the zero-rated and exemption items, said HLIB Research.

"Reinforced by slower income growth, lower commodity prices and tight loan conditions, we opine that consumer spending will remain subdued in the second quarter before recovering in the second half of 2015. We maintain our private consumption growth forecast at 5.5% for 2015, the slowest expansion since 2010," HLIB said in its report yesterday.

On inflation, it expects the consumer price index (CPI) to spike up by 1 percentage point in April and 0.5 percentage point in May.

"We believe the expanded list of zero-rated and exemption items will result in a lower-than-expected GST impact."

It maintained its headline inflation forecast at 2.5% for 2015. On a monthly basis, it expects the CPI growth to range between 3.0% and 3.5% in the second half of 2015.

It added that the overall impact on earnings is likely to be muted as most companies have already implemented and passed on the GST while impact on volume was expected to be minimal and temporary.

"While sales of some companies may experience quarterly fluctuations before and after GST implementation, we expect full year impact to be a better reflection of consumers taking time to adjust for the changes as well as the already weak consumer sentiment."

It said although some sectors have difficulty in passing through the GST while others decided to absorb to spur volume and market share, the impact is also unlikely to be significant due to the subdued consumer sentiment, companies focusing on cost cutting as a counter measure, lower commodity, fuel and electricity costs and the corporate tax cut in 2015.

Contrary to earlier fears about GST, HLIB said the FBM KLCI has appreciated 11.5% from recent lows to breakout from the previous downtrend line (1,816) and 200-day simple moving average (now 1,819). It added that momentum could carry it to test the next resistance of 1,878 and an all-time-high of 1,896.

"Despite potential of overshoot on the upside, we are maintaining our year-end target of 1,880."

HLIB said the potential risks include the Fed rate hike, recent weak purchasing managers' index, 1Malaysia Development Bhd, oil prices, the traditional volatile month of May and a potential Fitch rating downgrade.

It is still advocating defensive and value proposition with focus on sector upturn or 11 MP, resilient/visible earnings growth, high yield and defendable earnings, US dollar or raw material beneficiaries and battered stocks.