GST and SST in Property TPC – Practice Q7


How does GST (now repealed and will be replaced with SST) affect property transactions?


Little known fact about GST in Estate Agency Practice. Some people try to save on commission when dealing with agents and brokers. Apparently, some discounts are given being “illegal”.

As if he is illegal, then there is no GST. Wah, you save the 6% GST! How I wish this could be true in real life. Who pays for GST? He who appoints the representative, because he receives the service of estate agency. That is most of the time the owner. And, the fact that he who does not collect GST is not the issue of its legality - is little known.

Irrespective of who this representative is (being a illegal broker or registered agent), the duty to pay GST is not about his legality, but that a service had been rendered. Indeed, if you are an owner, and you don’t pay GST to an agent, the agent has to pay it out from his commission received. That is “GST inclusive”.

So, engaging an illegal broker, it is “GST inclusive”, that is all! NOT because he is illegal, then there is no GST. If he ever be caught, he is himself in deep trouble. And, if that is the choice - you don't want to pay GST, you can mention it to the registered agent, he might just waive it for you as well! In such case, he pays it himself.

Service Tax - Sales and Service Tax (SST)

SST will take effect on 1st Sep, 2018. By then, there will be 6% onto the Service of Estate Agent. Therefore, SST will take the same effect as GST on Service of the Estate Agency.

In the era of GST, there are two parts to taxes. One is the GST on the service. Another is GST on the Goods Sold. One is on service rendered and the other is the goods sold - the property. They are two separate things. First, GST on service rendered. It has been discussed earlier on.

(GST - historical and not necessary to know)

There are two categories of how GST is taxed on property, one is residential and another is commercial/land. Residential is exempted. Commercial/land above RM2 mio would require the payment of GST. However, the seller has to collect, not the agent or the lawyer or the purchaser. Next is the issue of input and output GST. Output tax is the RM6 of RM100 paid by purchaser. Input tax is the part you can claim back from Director General if you have paid for GST when acquiring the goods earlier on. If you had paid RM4 as GST for this property, you just need to pay the remaining RM2 for GST on this sale. According to the latest “GST General Guide”  (amended on 25 January 2017), the registered person may be allowed to claim input tax on the goods he holds at the time of registration based on the approved amount by the Director General.

As for SST on Service of Estate Agency, it is charged on all transaction of property with the service of an Estate Agency Firm.