7.4.f. What are the GST implications with respect to over allowances on trade-in vehicles?
Non-interpretative - straight application of the law.
Where the purchase of a trade-in by a dealer from a registered entity is a creditable acquisition, the input tax credit that can be claimed by the dealer will be equal to the GST charged by the supplier.
Where the person trading in the vehicle is not registered for GST and the dealer acquires the vehicle for purposes of sale or exchange the input tax credit will be the lesser of:
- 1/11th of the consideration provided (the amount allowed for the trade-in), or
- the amount of the GST payable when the vehicle is sold by the dealer
provided the subsequent supply of the vehicle by the dealer is a taxable supply.