PETALING JAYA: The implementation of the goods and services tax (GST) today is only expected to have a minimal impact on local banks, according to a report by CIMB Research.

Citing the Association of Banks in Malaysia, CIMB said in a report that any added costs incurred post-GST would be “mostly pass-through” and have a minimal impact on banks’ earnings.

“The direct negative impact of the implementation of the GST is the RM10mil to RM20mil additional cost of managing it.

“We also gathered that the banks are working with the regulators on the arrangements to claim from the Government the additional 6% GST they had paid to their vendors,” the research house said.

CIMB expects the imposition of the GST to dent consumer/business sentiment in 2015, at least within six months after the implementation, namely, between the second and third quarters of 2015.

“This does not bode well for banks’ loan and fee income growth. There have already been signs of weakening loan growth, which eased from 9.3% year-on-year in December 2014 to 8.6% in January 2015.

“We advise investors to continue trimming their holdings in the banking sector, given the concerns of weaker loan growth, margin contraction and higher credit costs,” said CIMB.

According to CIMB, among the items that would be “pass-through” costs are essentially fees and charges recovered from customers.

“This means that the bank is merely paying for services on behalf of the customer. The underlying transaction remains taxable (where applicable), but the tax invoice will be issued to the customer by the service provider directly (if the tax invoice had not been issued earlier to the bank).

“The bank will not charge an additional GST but will deduct the GST amount from the customer’s account to pay the service provider.”