Purchaser Not Required to Collect the GST or QST (or Calculate the QST)

In most cases where the purchaser of a used road vehicle is not required to collect the GST or QST (or calculate the QST), this is because the purchaser is an individual. However, the purchaser may also be a registrant that is ineligible for an input tax credit (ITC) or an input tax refund (ITR) for taxes paid on a vehicle. This is the case, for example, for large businesses under the QST system.

When a dealer that is a GST and QST registrant accepts a used road vehicle as a trade-in for a vehicle, the credit for the trade-in reduces the amount on which the GST and QST are calculated, provided:

  • the trade-in vehicle will be used or supplied in the dealer's commercial activities;
  • the person who trades in the used vehicle is not required to collect the GST or QST (or calculate the QST) on the vehicle; and
  • the person that trades in the used vehicle to the dealer is the owner of the vehicle.

If these conditions are met, a dealer that is a registrant must collect the GST and the QST on the difference between the vehicle's sale price and the amount credited to the purchaser for the trade-in vehicle.

If the amount credited to the purchaser for the trade-in vehicle is more than the sale price of the vehicle sold, the GST and the QST are nil.

Example 1

An individual who is not required to collect the GST or QST (or calculate the QST) purchases a new motor vehicle for $20,000. The dealer accepts the individual's old vehicle as a trade-in, crediting the individual $5,000 on the trade-in.

Sale price$20,000.00
Credit for the trade-in-$5,000.00
Total$15,000.00
Calculation of the GST ($15,000 x 5%)+$750,00
Calculation of the QST ($15,000 x 9.975%)+$1,496.25
Total payable (including the GST and the QST)$17,246.25
Example 2

An individual who is not required to collect the GST or QST (or calculate the QST) purchases a used motor vehicle for $20,000 from a used-vehicle dealer. The estimated value of the vehicle is $23,500, that is, the average wholesale price ($24,000) minus $500.

The dealer accepts the individual's old vehicle as a trade-in, crediting the individual $5,000 on the trade-in.

Sale price $20,000.00
Credit for the trade-in -$5,000.00
Total $15,000.00
Calculation of the GST ($15,000 x 5%) +$750.00
Amount due to the dealer $15,750.00
Estimated value (higher than the sum of the sale price and the GST charged)$23,500.00 
Credit for the trade-in-$5,000.00 
 $18,500.00 
QST payable to the Société de l'assurance automobile du Québec (SAAQ) ($18,500 × 9.975%) +$1,845.381
Total payable (including the GST and the QST) $17,595.38

1. The QST is calculated by the dealer and must be paid by the purchaser to the SAAQ when the vehicle is registered.

Under the QST system, large businesses can benefit from the trade-in rule until December 31, 2020, when they purchase road vehicles subject to the ITR restrictions for large businesses. This applies to vehicles weighing less than 3,000 kg that were acquired before January 1, 2018.

Example 3

A large business purchases a new motor vehicle for $20,000 in 2018. The dealer accepts the business's old vehicle, which weighs less than 3,000 kg and was acquired in 2017, as a trade-in for the purposes of resale, crediting the business $5,000 on the trade-in. The large business used the old vehicle exclusively (90% or more of the time) for commercial activities.

Purchase of the new vehicle
Sale price $20,000
GST ($20,000 x 5%) +$1,000
Sale price$20,000 
Credit for the trade-in-$5,000 
 $15,000.00 
QST ($15,000 × 9.975%) +$1,496.25
Total payable by the large business $22,496.25
Sale of the used vehicle
Sale price$5,000
GST ($5,000 x 5%)+$250
QST (0%)+$0
Total payable by the dealer$5,250
Note
  • In this case, the business is a registrant and must therefore collect the GST at the time the used vehicle is sold to the dealer. However, the business must not collect the QST because the dealer is purchasing the motor vehicle for resale purposes only.
  • The QST is calculated by the dealer and must be paid by the purchaser to the Société de l'assurance automobile du Québec (SAAQ) when the vehicle is registered.

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