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: 117781
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to cartridge-based reagents
This letter is in response to the letter of [mm/dd/yyyy] […] concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to cartridge-based reagents acquired by […][the organization].
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 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.
STATEMENT OF FACTS
Based on the information provided in your correspondence dated […], […][a document describing the product], as well as information available on the website of […][the Company], our understanding of the facts is as follows:
1.[The organization] purchase cartridge-based reagents from [the Company]. The reagents […] test for the presence of drugs-of-abuse […].
2.The […][tests] are designed to be used by practitioners in clinical laboratories, drug rehabilitation clinics, physician offices and other near-patient settings.
3.The reagents consist of two parts: A and B. The first part, part A, is a monoclonal antibody that is designed to link to the analyte (the ‘drug’ in this case) that is being tested for. Part B contains a conjugate. The conjugate is a molecule that consists of an enzyme attached to an analogue of the drug that is being tested for. The analogue is a part of the drug molecule, specifically some part that the antibody in Part A will bind to.
4.[…][Explains how the tests work]
5.[…][Explains variations of the tests]
6.[…][More technical information about the tests]
7.[…][More information about the reagents]
8.The reagents are supplied in liquid form, packaged in plates (i.e., cartridges) that consist of [#] pre-filled and sealed wells. The plates contain the A and B reagent in separate columns. Each plate will have A and B reagents for all the different […][tests]
9.The reagent plates (i.e., the cartridges) are approved by Health Canada as Class III medical devices, under Licence No. […], and are governed by the rules of that approval process.
RULING REQUESTED
The question is whether a supply of cartridge-based reagents, in the circumstances described above, qualifies for zero-rating under section 2 of Part I of Schedule VI to the ETA.
RULING GIVEN
Based on the facts set out above, we rule that a supply of cartridge-based reagents that contain monoclonal antibodies and are used to test for the presence of drugs-of-abuse is zero-rated under paragraph 2(a) of Part I of Schedule VI to the ETA.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
The general rule in section 165 is that every recipient of a taxable supply made in Canada shall pay tax calculated at the rate of 5% GST, 13%, 14%, or 15% HST, depending on the place of supply, on the value of the consideration for the supply, unless the supply is zero-rated. The tax rate in respect of a zero-rated supply is 0%. A zero-rated supply is a supply that is included in Schedule VI.
Section 2 of Part I of Schedule VI to the Excise Tax Act contains provisions that zero-rate a broad range of drugs and substances, other than drugs or substances labelled or supplied for agricultural or veterinary use only, that are regulated under federal legislation. Paragraphs 2(a) to 2(d.1) of Part I of Schedule VI zero-rate certain drugs or substances that are included in specific schedules to the Food and Drugs Act and its regulations and regulations made under the Controlled Drugs and Substances Act. In order to fall within paragraphs 2(a) to (d.1) of Part I of Schedule VI, the supply in question must be that of a drug or, in the case of paragraph 2(c), a “drug or other substance”.
[…], the Tax Court of Canada (TCC) decided in Centre Hospitalier Le Gardeur et al v The Queen 2007 TCC 425 (Le Gardeur) that certain in vitro diagnostic test kits are zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI to the ETA. Further to the TCC decision, the CRA adopted an interim administrative position, described in GST/HST Notice 248 - Application of the GST/HST to Supplies of In Vitro Diagnostic Test Kits (Notice 248), whereby the supply of an in vitro diagnostic test kit is zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI to the ETA 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.
Notice 248 indicates that CRA’s administrative position is temporary and that CRA will announce its decision with respect to the application of GST/HST to in vitro diagnostic products once an in-depth review of the matter has been completed.
The cartridge-based reagents acquired by [the organization] […] are an in vitro diagnostic product […]. The reagents contain monoclonal antibodies, which are listed in Schedule D to the Food and Drugs Act (Footnote 1) . The cartridge-based reagents are used in vitro to examine specimens derived from the human body and are not labelled or supplied for agricultural or veterinary use only.
The term “diagnosis”, when used in the medical sense, relates to the discovery, identification or recognition of a disease. Therefore, an in vitro diagnostic test must detect or identify a disease. In our view, the cartridge-based-reagents can be used to test for the presence of a substance that indicates whether or not an individual has consumed or ingested certain drugs-of-abuse. Testing for whether certain drugs-of-abuse have been ingested is one of many tests used by a medical practitioner for identifying a drug addiction. As such, all of the criteria described above are met and, therefore, a supply of the cartridge-based reagents is considered to be a supply of a drug for purposes of paragraph 2(a) of Part I of Schedule VI. Accordingly, the supply of the cartridge-based reagents is zero-rated under paragraph 2(a) of Part I of Schedule VI.
As indicated above, the CRA is reviewing its policy regarding the application of GST/HST to in vitro diagnostic test kits and whether certain in vitro diagnostic test kits diagnose a disease and are therefore “drugs” as defined in section 2 of the FDA. Health Canada administers the FDA and its Regulations. Our review of our policy will include consultations with and recommendations from Health Canada.
Amounts paid as or on account of tax
Where a supplier has charged or collected an excess amount as or on account of tax on supplies that qualify for zero-rating, the supplier may refund or credit the excess amount to the recipient 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 the recipient with a credit note containing prescribed information.
Alternatively, persons who have paid an amount as GST/HST on supplies that qualify for zero-rating may make an application to the CRA for a rebate of tax paid in error under section 261 using form GST189 General Application for Rebate of GST/HST (available on CRA’s website at www.cra-arc.gc.ca). The time limit to apply for this rebate is within two years after the day the amount was paid.
For more information, please refer to GST/HST Memorandum Series Chapter 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act and Guide RC4033, General Application for GST/HST Rebates.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952. 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,
Alison Jones
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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