Exchange of Car

[Ethirajan Parthasarathy]

A GST registered person exchanges his old car for new car.

The car Company credits him with

1) value of old car

2) Exchange Bonus and

3) Loyalty bonus. Item No. 1 is subject to GST as per notification No.8/2018 dated 25^th January 2018.

Are loyalty Bonus and exchange bonus are also subject to GST.

AI Summary

GST treatment of trade in: excess exchange value is taxable while loyalty and exchange bonuses as discounts reduce taxable value.
Exchange value in excess of the book value of the old car is part of the taxable consideration for the new car and attracts GST at the applicable rate under the notification. Loyalty bonus and exchange bonus, when provided as reductions in the sale price of the new car (discounts), are not separately subject to GST as they reduce the taxable value of the supply rather than constituting additional consideration.