GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX K1A 0L5
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Subject:
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GST/HST INTERPRETATION
NITCs for Used Car Transactions Between April 24 and June 30, 1996
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Dear XXXXX
Thank you for your letter of October 1, 1996 addressed to Mr. Mike Mathews. Your letter has been forwarded to me for a response. In your letter you ask two questions concerning the availability of notional input tax credits (NITCs) where an automobile dealer acquires a used vehicle from an Indian between April 24, 1996 and June 30, 1996 (the transitional relief period). These two questions are answered in the following. We apologize for the delay in responding to your letter.
Interpretation Given
Question No. 1
Where an automobile dealer sells a car to an Indian between April 24, 1996 and June 30, 1996 and accepts a used vehicle from the Indian as a trade-in towards the purchase of the new vehicle, is the dealer entitled to an NITC on the trade-in?
Response
Based on the information provided, an automobile dealer, who operated under the previous rules contained under paragraph 176(1)(a) of the Excise Tax Act (ETA) during the transitional relief period, is entitled to claim an NITC if all of the following conditions are met:
1. the sale of the new vehicle to the Indian and the purchase of the used vehicle are both done pursuant to a written agreement entered into before July 1, 1996;
2. the used vehicle is accepted as full or partial consideration for the supply of the new vehicle to the Indian;
3. the automobile dealer charged or collected GST calculated on the full price of the new vehicle sold to the Indian;
4. the Indian is not required to charge tax on the supply of the used vehicle to the automobile dealer; and
5. the automobile dealer is acquiring the used vehicle from an Indian for the purpose of consumption, use or supply in the course of commercial activities of the automobile dealer.
With respect to point number three, where an automobile dealer makes a taxable supply of a new vehicle to an Indian, the automobile dealer is considered to have charged (but not collected) GST on the consideration for the vehicle sold to the Indian for the purposes of the ETA.
Question No. 2
Where an automobile dealer acquires a vehicle between April 24, 1996 and June 30, 1996 from an Indian non-registrant (not in a trade-in transaction), is the automobile dealer then entitled to an NITC?
Response
Based on the information provided, irrespective of whether or not the person supplying the used vehicle to the automobile dealer is an Indian, an automobile dealer who operated under the previous rules contained under paragraph 176(1)(a) of the ETA during the transitional relief period is entitled to claim an NITC equal to 7/107 of the consideration for the supply of the used vehicle, provided that the automobile dealer is acquiring the used vehicle from the Indian for the purpose of consumption, use or supply in the course of commercial activities of the automobile dealer.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
For your information, enclosed is a copy of Technical Information Bulletin B-084, Treatment of Used Goods.
Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613 954-8253.
Yours truly,
Gregory Smart
A/Rulings Officer
Industries Unit
General Operations and Border Issues Division
GST/HST Rulings and Interpretations Directorate
Encl.
Legislative References: s. 176(1) of the ETA (pre-bill C-70), s. 25(4) of Bill C-70
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