• 1.f. What is the amount of input tax credit that a finance company can claim where they acquire a car from a dealer for the purposes of bailment and withhold part of the consideration as a security deposit?

    Non-interpretative - straight application of the law.

    The finance company is entitled to claim an input tax credit equal to 1/11th of the consideration paid provided they hold a tax invoice. The amount of consideration is the amount advanced plus the security deposit.

    Example

    A dealer sells a car to a financier for $22,000 including $2,000 GST. The finance company advances $18,000 and holds $4,000 as a security deposit. The consideration paid by the finance company is $22,000 (that is, $18,000 plus $4,000). The amount of input tax credit that the finance company can claim is $2,000 (that is, 1/11th of $22,000).
      Last modified: 07 Jun 2012QC 16411