What are the VAT consequences of this transaction?

An input tax deduction is denied on acquisition of the motor car as it is acquired for the exempt purpose of transporting fare-paying passengers and not for resale or rental to a third party.

However, if the motor dealer subsequently enters this motor car as stock in its dealership and sells it to a customer, the dealer is required to declare output tax under section 7(1)(a), but may then deduct the input tax under section 18(4) read with section 16(3)(f).