Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 172551
Dear [Client]:
Subject: GST/HST RULING
GST/HST INTERPRETATION - PROPOSED LAW/REGULATION - Intermittent urinary catheters
Further to your letter of July 26, 2014 to […], we were asked by his office to provide you information concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply and importation of intermittent urinary catheters. We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. The Government of New Brunswick and the Government of Newfoundland and Labrador have proposed to increase the rate of the HST in those provinces from 13% to 15%, effective July 1, 2016. The Government of Prince Edward Island has proposed to increase the rate of the HST in that province from 14% to 15%, effective October 1, 2016. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand from your letter that you have purchased two types of intermittent catheters: […][ABC] and […][XYZ]. The following description of the catheters is taken from […]:
* [ABC] single-use catheters are designed for single-catheterization.[…]
* [XYZ] catheters are […] single-use catheters […]
You state in your letter that when you purchase the catheters from […] in Canada you are not charged the HST on the purchase price. However, when you purchase the catheters in the United States of America, upon importation you are required to pay the HST on the value of the catheters to the Canada Border Services Agency (CBSA). You would like an explanation as to why you have to pay the HST upon importation of the catheters.
As per GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) will not issue a ruling when a request involves a matter dealing with proposed or draft legislation, draft regulations, budget proposals, or notices of ways and means motions. Accordingly, you will find our response presented in the following manner:
* The first part entitled Rulings Given addresses the tax status of intermittent urinary catheters sold in Canada and imported into Canada on or before March 22, 2016.
* The second part entitled Interpretation Given addresses the tax status of catheters sold in Canada and imported into Canada after March 22, 2016.
* Lastly, you will find a summary of our response.
RULINGS REQUESTED
1. Are supplies of intermittent urinary catheters made in Canada on or before March 22, 2016 taxable supplies subject to the GST/HST?
2. Are importations of intermittent urinary catheters into Canada on or before March 22, 2016 subject to the GST/HST?
RULINGS GIVEN
Based on the facts set above, we rule that:
1. Supplies of intermittent urinary catheters made in Canada on or before March 22, 2016 are taxable and subject to the GST/HST at the appropriate rate (5%, 13%, 14% or 15%) depending on the province in which the supply is made.
2. Importations of intermittent urinary catheters into Canada on or before March 22, 2016 are subject to the HST at the rate of 13% when imported by a resident of Ontario.
EXPLANATION
Supplies of intermittent urinary catheters made in Canada on or before March 22, 2016
Generally all supplies of property and services made in Canada are subject to the GST/HST pursuant to section 165 unless specifically relieved under the ETA. There are exceptions for medical devices that are specifically identified in Part II of Schedule VI as being zero-rated (tax applies at the rate of 0%). If a medical device is not included in Part II of Schedule VI, then the supply of the medical device would be subject to GST/HST, unless another zero-rating or exempting provision applies.
Under Part II of Schedule VI some medical devices are zero-rated in their own right (e.g. supplies of artificial eyes, artificial teeth, hearing aids) while other devices are zero-rated only when supplied under certain conditions (e.g. on the written order of a specified professional for use by a consumer named in the order, or specially designed for use by an individual with a disability). The provisions that relate to urinary products are sections 25 and 37 of Part II of Schedule VI.
Section 25 of Part II of Schedule VI zero-rates a supply of a medical or surgical prosthesis, or an ileostomy, colostomy or urinary appliance or similar article that is designed to be worn by an individual.
Intermittent catheters are typically single-use catheters used to drain the bladder and then discarded, they are not designed to be worn by an individual. As the condition that the urinary appliance is “designed to be worn by an individual” is not met, supplies of intermittent urinary catheters are not zero-rated under section 25 of Part II of Schedule VI.
Section 37 of Part II of Schedule V zero-rates a supply of an incontinence product that is specially designed for use by an individual with a disability.
Incontinence products assist an individual in managing involuntary loss of urine. Some incontinence products absorb urine leakages, reduce odours, control bacteria, maintain dryness, and protect the individual against skin irritation; some products prevent the involuntary loss of urine; and some products collect urine in a collection bag. Examples of incontinence products that may be zero-rated supplies under this section include underpads, underwear, chair and other seat covers (e.g., a seat cover for a lift chair, recliner, wheelchair, car or scooter), incontinence rings and condom catheters.
Intermittent urinary catheters are not incontinence products for purposes of section 37 as they are designed to drain the bladder and not designed to manage the involuntary loss of urine. Accordingly, the supplies are not zero-rated under section 37 of Part II of Schedule VI.
Therefore, supplies of intermittent urinary catheters made in Canada on or before March 22, 2016 are taxable supplies and subject to the GST/HST at the applicable rate depending on the province in which the supply is made, under subsection 165(1) and 165(2).
Importations into Canada on or before March 22, 2016
Section 212 and subsection 212.1(2) provide for the imposition of the GST and the provincial part of the HST in respect of goods imported into Canada.
Pursuant to section 212, every person who is liable under the Customs Act to pay duty on imported goods, or who would be so liable if the goods were subject to duty, is liable to pay the GST on the goods calculated at the rate of 5% on the value of the goods.
Section 212.1 imposes the provincial part of the HST at the appropriate rate in respect of non-commercial importations by a person who is resident in a participating province (i.e., Nova Scotia, New Brunswick, Ontario, Prince Edward Island or Newfoundland and Labrador), For a resident of Ontario, the rate would be 8%. This tax applies in addition to the tax imposed under section 212.
Pursuant to section 213, no GST/HST is payable upon importation of goods included under Schedule VII. Under section 6 of Schedule VII a non-taxable importation includes, in part, a supply under Part II of Schedule VI.
In other words, if the supply of a medical device is included in Part II of Schedule VI that device may be imported on a non-taxable basis pursuant to section 213. That is, no GST/HST would be paid upon importation.
However, as explained above, for supplies made on or before March 22, 2016, there is no provision in Part II of Schedule VI that zero-rates supplies of intermittent urinary catheters. Accordingly, GST/HST is payable upon importation of the intermittent urinary catheters to Canada pursuant to sections 212 and 212.1. The HST at 13% is payable upon importation of intermittent urinary catheters by a resident of Ontario.
Canadian residents may qualify for an exemption which allows returning residents to bring back goods valued up to a specified dollar limit without having to pay duties or taxes, including customs duty, GST/HST and federal excise levies. The CBSA administers the Customs Act and any inquiries regarding the interpretation and the administration of that Act should be directed to them at 1-800-461-9999.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
INTERPRETATION GIVEN
Supplies of intermittent urinary catheters made after March 22, 2016
As mentioned above, supplies of intermittent urinary catheters made on or before March 22, 2016 are taxable at the appropriate rate depending on the province in which the supply is made.
A Notice of Ways and Means Motion introduced by the Minister of Finance on March 22, 2016 proposes to add intermittent urinary catheters to the list of zero-rated medical devices. The proposed amendment is set forth in Bill C-15, Budget Implementation Act, 2016, No. 1, which received First Reading in the House of Commons on April 20, 2016. Although this proposed measure is subject to parliamentary approval, consistent with its standard practice, the CRA is administering this measure on the basis of the Notice of Ways and Means Motion.
Specifically, proposed section 25.1 of Part II of Schedule VI would zero-rate a supply of an intermittent urinary catheter if the catheter is supplied on the written order of a specified professional for use by a consumer named in the order. This would apply to any supply made after March 22, 2016.
Under section 1 of Part II of Schedule VI, “specified professional” means a person who is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy; or a registered nurse. Therefore, only a written order by a physician, physiotherapist, occupational therapist or a registered nurse will satisfy the condition “on the written order of a specified professional”.
The term “written order” is not defined in the ETA. For purposes of Part II of Schedule VI, the CRA considers a written order to be a document that contains the name of the individual, a description of the medical device required by the individual, the name and signature of the specified professional and the date of the assessment and completion of the written order.
It is the purchaser’s responsibility to provide a copy of the written order to the supplier. The purchaser does not have to be the person named in the order. Persons who supply intermittent urinary catheters on a zero-rated basis must retain sufficient documentation to enable the CRA to verify that the sale of the medical device was supplied on the written order of a specified professional. A written order from other health professionals, including an individual who is authorized under the laws of a province to prescribe medical devices who is not a “specified professional” would not be sufficient for a supplier to zero-rate a supply of an intermittent catheter.
Intermittent urinary catheters that are not supplied on the written order of a specified professional for use by a consumer named in the order are taxable supplies and subject to the GST/HST at the applicable rate depending on the province in which the supply is made.
For example, tax would have to be paid on the consideration for intermittent urinary catheters supplied throughout the distribution chain (e.g., wholesaler to retailer) or supplied to a hospital authority or long-term care facility for general use by patients or residents of the facility and not on the written order of a specified professional for use by a consumer named in the order. This also includes online purchases of intermittent urinary catheters by an individual where they are not supplied on the written order of a specified professional for use by a consumer named in the order.
Importation into Canada
As explained above, pursuant to section 213, in conjunction with section 6 of Schedule VII, no GST/HST is payable upon importation of goods, the supply of which is included under Part II of Schedule VI.
For supplies made after March 22, 2016, if the intermittent urinary catheters purchased outside Canada are supplied on the written order of a specified professional for use by a consumer named in the order, the supply would be zero-rated under section 25.1 of Part II of Schedule VI. Therefore, under section 213, the intermittent urinary catheters would not be subject to GST/HST upon importation into Canada.
If the intermittent urinary catheters purchased outside Canada are not supplied on the written order of a specified professional for use by a consumer named in the order, the supply would not be zero-rated under section 25.1 of Part II of Schedule VI. Accordingly, the importation of the catheters would be a taxable importation subject to the GST/HST.
The determination of whether the importation of the intermittent urinary catheters is a non-taxable importation would require an examination of documentation and all relevant facts and circumstances relating to the importation. The supplier’s invoice should clearly indicate that the intermittent urinary catheters are supplied on the written order of a specified professional for use by a consumer named in the order. When importing goods, it is the responsibility of the importer of record to provide evidence that the condition for zero-rating has been met.
As stated above, Canadian residents may qualify for an exemption which allows returning residents to bring back goods valued up to a specified dollar limit without having to pay duties or taxes, including customs duty, GST/HST and federal excise levies. Any inquiries regarding this issue should be directed to the CBSA at 1-800-461-9999.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter on the proposed amendment(s) to the ETA, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to these proposed amendments, if enacted, or to the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
SUMMARY
1. Supplies of intermittent urinary catheters made on or before March 22, 2016 are taxable and subject to the GST/HST at the appropriate rate (5%, 13%, 14% or 15%) depending on the province in which the supply is made, under subsection 165(1) and 165(2).
2. Supplies of intermittent urinary catheters made after March 22, 2016 would be zero-rated if the catheter is supplied on the written order of a specified professional for use by a consumer named in the order, under proposed section 25.1 of Part II of Schedule VI.
3. The GST/HST is payable upon the importation of intermittent urinary catheters to Canada on or before March 22, 2016, under sections 212 and 212.1. The HST at 13% is payable upon importation of intermittent urinary catheters by a resident of Ontario. In addition, Canadian residents may qualify for an exemption which allows returning residents to bring back goods valued up to a specified dollar limit without having to pay GST/HST upon importation of the goods.
4. If the intermittent urinary catheters purchased outside Canada after March 22, 2106 are supplied on the written order of a specified professional for use by a consumer named in the order, the supply would be zero-rated under section 25.1 of Part II of Schedule VI and the intermittent urinary catheters would not be subject to GST/HST upon importation into Canada under section 213.
5. If the intermittent urinary catheters purchased outside Canada after March 22, 2106 are not supplied on the written order of a specified professional for use by a consumer named in the order, the supply would not be zero-rated and the HST at 13% would be payable upon importation of intermittent urinary catheters by a resident of Ontario, under sections 212 and 212.1. In addition, Canadian residents may qualify for an exemption which allows returning residents to bring back goods valued up to a specified dollar limit without having to pay GST/HST upon importation of the goods.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-572-2636. 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,
Maria Forte-Long
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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