GST will not deter potential franchise investors

KUALA LUMPUR: The Domestic Trade, Cooperatives and Consumerism Ministry believes the implementation of the Goods and Services Tax (GST) is unlikely to deter a potential franchisee from investing in a franchise business.
Deputy Minister Datuk Seri Ahmad Bashah Md Hanipah said, for now, the ministry has yet to receive complaints on any increase in franchise fees, noting through his observation the franchisors are still maintaining the fees.
"For example, if previously the franchise fee for Tutti Frutti (frozen yogurt) is RM300,000, now it is still maintained at RM300,000. It has not been increased," he told reporters at the press conference on Franchise International Malaysia 2015 (FIM 2015) held by Malaysian Franchise Association (MFA) yesterday.
"There is no 6% on top of the franchise fees. They (franchisees) are still paying the same amount," he said, adding that the existing franchisors and franchisees whose taxable turnover exceeds RM500,000 a year is required to register for GST.
In terms of royalty payments, Ahmad Bashah said it depends on the business owner or the franchisor to decide whether to maintain or increase it, based on the franchise agreement.
He said franchisees who earn under RM500,000 are given an option to register for GST, noting it can be useful for them as they will be entitled to claim input tax credits. "GST is not a cost to businesses because all direct or indirect inputs are claimable as credit."
Ahmad Bashah expects the franchise businesses to continue to grow despite the implementation of GST, driven by the initiatives done by government to promote the franchise industry, as well as wide business opportunities, especially among the young generations.
Also at the press conference, MFA chairman Datuk Mohd Latip Sarrugi said the three-day FIM 2015 starting on June 12 is expected to attract RM370 million potential franchise investments, compared with RM360 million last year.
"We expect 12,000 visitors will attend this programme, from 10,000 visitors last year," he said, adding that RM20 million has been allocated for the programme that aims to expand local franchise industry until 2020.
He said 770 franchise companies, which include those in the food and beverage, education and services sector, have registered with MFA, of which 20% to 22% are foreign.
The 22nd international franchise exhibition and conference will be officiated by Prime Minister Datuk Seri Najib Abdul Razak at Putra World Trade Centre here on June 13.