7.4.b. How are input tax credits calculated on used vehicles traded in from unregistered entities (or entities not required to be registered for GST) that have been acquired for purposes of sale or exchange?

Non-interpretative - straight application of the law.

If a dealer acquires a second-hand vehicle from an unregistered entity (or an entity not required to be registered for GST) for purposes of sale or exchange, the dealer may be entitled to an input tax credit pursuant to section 66-10 of the GST Act. If the consideration for the acquisition is more than $300, the dealer can only claim an input tax credit at the time the vehicle is subsequently sold, provided the sale is a taxable supply. The input tax credit is the lesser of:

  • 1/11th of the amount the dealer paid for the car, or
  • the amount of the GST payable when the vehicle is subsequently sold.
    Last modified: 07 Jun 2012QC 16411