CRA draws negative inferences from a rule intended to provide a GST/HST-exemption safe harbour
Proposed s. 7.4 of ETA, Sched V, Pt. II would generally exempt a single supply of a “multidisciplinary health care service” where substantially all of the consideration for the supply is reasonably attributable to two or more particular services listed in ss. 5 to 7.3 of that Part.
CRA has inferred that if the “substantially all” test is not satisfied, all of the consideration for the composite supply is taxable. For example, if a rehab service for a fixed fee could reasonably be attributed as to 82% to “good” services (chiropractic, physiotherapy, acupuncture) and 18% to massage therapy services, ALL of the fee is treated as taxable. This example is particularly striking because the three “good” services are all listed in paragraphs within the same exemption section (s. 7). Since the predominant character of the supply is of a service described in s. 7, why does the single supply doctrine not apply to exempt the supply without reference to s. 7.4? The answer may be that CRA is inferring that Finance was intending to exempt only what was described in its s. 7.4 safe harbour.
Contrast this with the definition of “institutional health care service” which in a similar listing of paragraphs sets out various services provided at, for example, an assisted-living facility that are included in that exemption, such as meals, accommodation and the personal care workers. It clearly is not intended that the fee charged to a resident is not exempted because he or she receives a single supply rather than separate supplies of these listed components. The only difference appears to be a purely semantic one – the s. 7 services are not given a label of, say, regulated health care service.
Neal Armstrong. Summary of GST/HST Notices - Notice 311, Proposed Exemption of Multidisciplinary Health Care Services, May 2019 under ETA, Sched V, Pt. II, s. 7.4.