1.e. How are input tax credits calculated on used vehicles traded in from unregistered entities and sold to a finance company for purposes of bailment to the dealer?
Non-interpretative - other references (see GSTR 2002/2 - Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions).
Provided the dealer acquired the vehicle for purposes of sale or exchange, a dealer will be entitled to an input tax credit when the vehicle is sold to the finance company for purposes of bailment. The input tax credit that the dealer can claim is the lesser of:
- 1/11th of the consideration provided for the acquisition, that is, the trade-in value, or
- the GST payable on the subsequent taxable supply to the finance company.