When should I pay my GST/SST on commission?
A good friend called up saying that his agent used the LO (Letter of Offer) date to pay his commission and thus, inclusive of GST as it was in May 2018 (date of LO). However, he only signed the TA (Tenancy Agreement) yesterday – 28th June, 2018. The agency firm charged him GST on the commission.
Should or should not the GST be imposed on the Commission?
As we understand, GST becomes ZERO on 1st June, 2018 as promised by the Pakatan Harapan Government (Manifesto).
Actually, the question has only 1 part – date of completion of instruction. Should it be date of LO or TA?
Based on Standard 4 MEAS 2014:
4.2.3 If the sale and purchase agreement or letting or leasing agreement is unconditional, the estate agency fee is due upon the signing of the sale and purchase agreement or letting or leasing agreement.
4.2.4 When the sale and purchase agreement or letting agreement or leasing is conditional, the estate agency fee is due when the last of the conditions are met i.e. when the agreement becomes unconditional.
The agreement becomes unconditional when both parties reached all the conditions of the tenancy – security deposits, utility deposits, rental payment and any other agreed payments. The signing of Tenancy Agreement is ceremonial as it usually falls after all the conditions have been met.
Therefore, if all the conditions were met on 28th June, 2018 and not on the day of LO (in May, 2018), the payment of commission should be 28th June, 2018. Thus, the service rendered was only completed 28th June, and not in May, 2018. As GST is ZERO rated from 1st June, 2018 onwards, there should not be any GST payment for this service.