28 May 1996 Interpretation File No. 11650-3

Regarding the acquisition by a GST registered individual of a passenger vehicle (the "vehicle") for use less than exclusively (i.e., less than 90%) in the registrant's commercial activities, CRA stated:

Generally, subsection 202(4) … provides for an ITC (determined by the formula 'A x B') equal to the tax fraction (7/107) of the CCA in respect of the passenger vehicle or aircraft that was deducted under the Income Tax Act in computing the income of the registrant from those commercial activities for that taxation year of the registrant . …

[A]lthough [s. 202(4)] does not require the registrant to segregate the class 10 vehicle from all other property in that class… it does, however, call for a separate calculation to be made by the registrant (formula 'A x B' discussed above) to determine the correct amount of ITC available on the passenger vehicle. It is therefore our opinion that a separate tracking system may be required … .

The registrant will be entitled to claim an ITC in the year of disposition of the passenger vehicle determined by the formula provided under subsection 202(4) of the ETA for the period in which the vehicle was used in that taxation year in the commercial activities of the registrant. In other words, no ITC will be available to the registrant on the passenger vehicle for the period subsequent to its disposition since the property is no longer used in the registrant's commercial activities.

Regarding the subsequent disposition by a GST registered individual of a passenger vehicle (the "vehicle") previously acquired for use less than exclusively (i.e., less than 90%) in the registrant's commercial activities, CRA stated:

[N]o GST will be charged on the disposition of the passenger vehicle. Pursuant to subsection 203(3) of the ETA, a registrant who makes a supply by way of sale of a passenger vehicle or aircraft that is capital property of the registrant and, at any time prior to its disposition, the property is not used exclusively in the commercial activities of the registrant, the supply of the property will be deemed not to be a taxable supply (and, accordingly, no GST will be charged on the sale of the property).