Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 104243
Business Number: XXXXX
Attention: XXXXX XXXXX
January 22, 2010
Dear Madam:
Subject:
GST/HST INTERPRETATION
Tax Status of In Vitro Diagnostic Test Kits
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of in vitro diagnostic test kits.
HST applies at the rate of 13% in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
The XXXXX (Region) is a registered charity under the Income Tax Act. The Region has also been designated a hospital authority for purposes of the ETA effective XXXXX.
The Region currently claims a public service body (PSB) rebate under section 259 at the specified percentage of 50% in respect of its status as a registered charity. The Region also claims an additional 33% PSB rebate in respect of its activity of operating public hospitals, which effectively amounts to an 83% rebate in respect of this activity. Therefore, where the Region has paid the GST/HST on its purchases of in vitro diagnostic test kits, it would have claimed a PSB rebate at either 50% or 83%.
Interpretation Requested
In light of the Tax Court of Canada decision in Centre Hospitalier Le Gardeur et al v The Queen [2007] ETC 3101, you would like to know whether the Region can claim a rebate to recover the remaining portion of the GST/HST it paid on purchases of in vitro diagnostic test kits.
Interpretation Given
It has been the Canada Revenue Agency's (CRA's) position that supplies of in vitro diagnostic test kits designed for laboratory use are subject to the GST/HST. However, the Tax Court of Canada (TCC) decided in Centre Hospitalier Le Gardeur et al v The Queen [2007] ETC 3101 that certain in vitro diagnostic test kits are zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI to the ETA.
The CRA is currently reviewing the impact of the TTC decision, which is dated July 20, 2007.
In the interim, the CRA has adopted an administrative position which is in keeping with the TCC decision. This administrative position, described below, also appears in GST/HST Notice No. 248 Application of the GST/HST to Supplies of In Vitro Diagnostic Test Kits, available on the CRA's web site at http://www.cra-arc.gc.ca. This position applies from the date of the TCC decision until such time as the CRA review in this matter is completed.
The CRA's administrative position is that the supply of an in vitro diagnostic test kit is zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI if it is for use in the diagnosis of a disease in humans and it contains one or more of the following substances, which were listed in the TCC decision:
• monoclonal and polyclonal antibodies;
• blood and blood derivatives;
• snake venom; and
• micro-organisms that are not antibiotics.Suppliers of in vitro diagnostic test kits containing one or more of the four above-listed substances may sell such products on a zero-rated basis. Conversely, in vitro diagnostic test kits which do not contain one or more of these substances will be subject to the GST/HST at 5% or 13%.
Where a supplier has collected and remitted the GST/HST on supplies that qualify for zero-rating under this administrative position, the supplier may refund or credit the amounts collected as GST/HST to its customers in accordance with section 232. If the supplier refunds or credits the amounts collected as GST/HST, it must do so within two years after the day the amount was charged or collected and it must provide its customer with a credit note containing prescribed information iFootnote 1.
Alternatively, persons who have paid an amount as GST/HST on supplies that qualify for zero-rating under the CRA's administrative position may make an application to the CRA for a rebate of tax paid in error under section 261. The time limit to apply for this rebate is within two years after the day the amount was paid.
In the situation you have described, the Region is entitled to claim a rebate of tax paid in error for amounts paid as GST/HST on in vitro diagnostic test kits that meet the requirements of CRA's administrative position (i.e., zero-rated in vitro diagnostic test kits), provided all of the other conditions of section 261 are met.
Where the Region has already claimed a 50% or 83% PSB rebate under section 259 in respect of an amount paid as GST/HST on zero-rated in vitro diagnostic test kits, the Region may only include in its rebate for tax paid in error the difference between the amount already recovered as part of the PSB rebate and the total amount paid as GST/HST.
Note that persons who file tax paid in error rebate claims with the CRA for tax paid on in vitro diagnostic test kits must provide sufficient documentation to enable the CRA to verify that the test kits that are the subject of the claim contain one or more of the above-listed substances. No rebate will be payable for the GST/HST paid on in vitro diagnostic test kits that do not contain one or more of these four substances.
The CRA will announce its final decision on this issue once its review is completed. Please note that any change to the CRA's position, should one occur, will be effective on a prospective basis.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4289. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Brian Olsen, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
XXXXX
i 1. The prescribed information is described in paragraph 16 of GST/HST Memoranda Series 12.2 Refund, Adjustment, or Credit of the GST/HST Under Section 232 of the Excise Tax Act, available on the CRA's website.
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