GST on Trade In Items

Refer to 

http://www.customs.gov.my/en/pg/pg_ig/Retailing%20(revised%20as%20at%2030%20December%202013).pdf

TRADE-IN GOODS

24. When a transaction involves trade-in goods, the consideration for the supply is not wholly in money. In such a supply, the consideration of supply is the aggregate of:-

(i) the amount in money as part of the consideration in money; and

(ii) the open market value of the trade-in goods as part of the consideration not in money.

Example 5: A registered retailer sells to a customer a new television, for RM1,908.00 inclusive of GST. In exchange for the new television, the customer trades-in an old television where the open market value (OMV) is RM1,060.00 and the balance is paid by cash.

Scenario 1: Customer is a non-registered person;

Retailer

Price (inclusive of GST) of new television : RM1,908.00

Consideration Cash : RM 848.00

Trade-in old television : RM1,060.00

Total Consideration : RM1,908.00

6% GST inclusive : RM 108.00 (RM1,908.00 X 6%/106%)

The retailer accounts for output tax amounting to RM108.00.

Scenario 2: Customer is a registered person.

Customer

Consideration received by customer = New television

Open Market Value of new television : RM1,908.00

6% GST inclusive : RM 108.00

(RM1,908.00 X 6%/106%)

Both registered retailer and the customer have to account for output tax as follows:-

Retailer – RM 108.00

Customer – RM 108.00

Both the registered retailer and the customer are entitled to claim the GST incurred as input tax if the goods acquired is used for making taxable supplies.