Issue
Is the entity, a primary producer, entitled to claim an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for GST included in the price paid in respect of a new truck it acquired under a hire purchase agreement entered into on 30 April 2001, when the truck is not delivered until 1 June 2001?
Decision
Yes, the entity is entitled to claim an input tax credit under section 11-20 of the GST Act in respect of the new truck it acquired under the hire purchase agreement.
Facts
The entity is a primary producer. The entity purchased a new truck for use in its primary production business. The hire purchase agreement was entered into on 30 April 2001. The truck was delivered to the entity on 1 June 2001. The supply of the truck to the entity, made through a hire purchase agreement, is a taxable supply under section 9-5 of the GST Act.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes.
Under section 11-5 of the GST Act, a creditable acquisition is one where: • an entity acquires anything solely or partly for a creditable purpose; and • the supply of the thing to the entity is a taxable supply; and • the entity provides, or is liable to provide consideration for the supply; and • the entity is registered or required to be registered.
Subsection 11-15(1) of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that the entity makes the acquisition in carrying on its enterprise.
In this instance, the acquisition of the truck by the entity is for the purpose of its primary production business. As such, the acquisition by the entity is for a creditable purpose under subsection 11-15(1) of the GST Act.
The supply of the truck is a taxable supply. The entity is purchasing the truck and therefore provides consideration for the supply. The entity is registered for GST.
Therefore, the entity is making a creditable acquisition as all the requirements of section 11-5 of the GST Act are satisfied.
However, section 20 of the A New Tax System (Goods and Services Tax Transition ) Act 1999 (Transition Act) provides special rules in relation to the purchase of motor vehicles.
Subsection 20(2) of the Transition Act provides that there is no entitlement to input tax credits for the purchase of a motor vehicle if the vehicle was purchased before 23 May 2001.
Therefore, providing the entity made a creditable acquisition under section 11-5 of the GST Act, the entity is able to claim full input tax credits for a motor vehicle acquired by it on or after 23 May 2001.
Paragraph 6(2)(a) of the Transition Act provides that the time of acquisition of goods is when they are removed. The entity did not remove the truck from the supplier until 1 June 2001.
Therefore, the entity acquires the truck on 1 June 2001.
As the entity acquired the truck after 23 May 2001, section 20 of the Transition Act does not apply.
Accordingly, the entity is entitled to claim input tax credits under section 11-20 of the GST Act for GST included in the price paid in respect of the new truck it acquired under a hire purchase agreement entered into on 30 April 2001, when the truck is not delivered until 1 June 2001. [Note: Paragraph 20(4)(c) of the Transition Act provides that section 20 of the Transition Act does not apply if the purchase of the new truck by the primary producer would not have been taxable under the sales tax law. If this were the case then the entity would have been entitled to an input tax credit on the acquisition of the new truck regardless of the date of delivery.]