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, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 183395
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Application of the GST/HST to Copper Intrauterine Devices
Thank you for your fax of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of copper intrauterine devices (IUDs). We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. 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
We understand the following:
1. You [ask how] […] the GST/HST [applies] to the sale of copper IUDs […].
2. […].
3. […].
RULING REQUESTED
You would like to know whether supplies of copper IUDs could be zero-rated throughout the distribution chain.
RULING GIVEN
Based on the facts set out above, we rule that supplies of copper IUDs are not zero-rated supplies and GST/HST is applicable throughout the distribution chain at the applicable rate depending on the province in which the supply is made.
EXPLANATION
Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Zero-rated supplies are included in Schedule VI.
The Canada Revenue Agency (CRA) published the article “Supplies of intrauterine devices” in the Excise and GST/HST News No. 101 on its website in March 2017, which explains the application of the GST/HST to the supply of hormonal IUDs and copper IUDs. Part II of Schedule VI lists medical devices for human use that are zero-rated for GST/HST purposes. Some devices are zero-rated in their own right, such as supplies of artificial eyes, artificial teeth and hearing aids. Other devices are zero-rated only when supplied under certain conditions (for example, on the written order of a specified professional for use by a consumer named in the order, or when specially designed for use by an individual with a disability). Part II of Schedule VI does not contain any provision that would zero-rate the supply of an IUD.
Although there are no provisions that zero-rate the supply of an IUD as a device, the supply of certain IUDs may be considered to be a supply of a drug for purposes of the GST/HST. Part I of Schedule VI contains provisions that zero-rate a broad range of drugs and substances that are regulated under federal legislation. Paragraph 2(b) of Part I of Schedule VI zero-rates a supply of “a drug that is set out on the list established under subsection 29.1(1) of the Food and Drugs Act or that belongs to a class of drugs set out on that list, other than a drug or mixture of drugs that may, under that Act or the Food and Drug Regulations, be sold to a consumer without a prescription”. For purposes of paragraph 2(b), drug means a drug as defined in the Food and Drugs Act.
CRA has received confirmation that the hormonal IUDs available in Canada contain a drug which is on the list established under subsection 29.1(1) of the Food and Drugs Act and requires a prescription from a physician to be purchased. Health Canada has advised that hormonal IUDs are drugs as defined in the Food and Drugs Act. Therefore, the supply of hormonal IUDs is zero-rated pursuant to paragraph 2(b) of Part I of Schedule VI.
Although hormonal IUDs may be considered drugs for purposes of the Food and Drugs Act, copper IUDs are not drugs as defined in the Food and Drugs Act. As they are not drugs, the zero-rating provisions in Part I of Schedule VI do not apply to sales of these products and as such, sales of copper IUDs are subject to GST/HST at the applicable rate (5%, 13% or 15%) depending on the province in which the supply is made. Therefore, sales of copper IUDs are subject to GST/HST throughout the distribution chain, regardless of whether they are prescribed by a medical practitioner and/or dispensed by a pharmacist.
[…]
In order to treat copper IUDs as zero-rated supplies, a legislative amendment to the ETA would be required. Legislative amendments are a matter of tax policy, which fall within the responsibility of the Department of Finance Canada. We have notified officials at the Department of your concerns.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at […]. 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,
Art Blommesteijn
Health Care Sectors Unit
Public Sectors Bodies and Governments Division
Excise and GST/HST Rulings Directorate