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
[Addressee]
Case Number: 229506
Dear [Client]:
Subject: GST/HST RULING
Tax status of a medical wound dressing
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to a medical wound dressing.
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:
* Your client sells a liquid bandage type of wound dressing […] (the “Product”).
* Your client sells the Product to medical professionals as well as to the open market.
* As per your discussions with Health Canada, the Product is considered a Class II medical device according to the Medical Device Regulations Classification rules.
* The Product is a moisture-retaining dressing made with colloidal hydrogel containing highly stable metal oxide nanoparticles that provide a non-pharmaceutical effect for a natural healing process.
* The Product is designed to be in direct superficial contact with the wound.
* The Product promotes wound healing and protection from infection by absorbing exudate and facilitating autolytic debridement.
* The Product is designed to be used as a topical wound dressing and its application includes chronic wounds […].
RULING REQUESTED
You would like to know the tax status of the Product and whether it can be zero-rated under Part II of Schedule VI.
RULING GIVEN
Based on the facts set out above, we rule that the Product is not zero-rated under any provision of Schedule VI to the ETA and is therefore subject to GST/HST at the applicable rate, depending on the province in which the supply is made.
EXPLANATION
Part II of Schedule VI to the ETA , lists medical devices for human use that are zero-rated; i.e. taxable at 0%. Some 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 medical practitioner for use by a consumer named in the order, or specially designed for use by an individual with a disability).
If a medical or assistive device is not included in Part II of Schedule VI, then the supply of that device would be subject to tax at the applicable rate, depending on the province in which the supply is made, unless another provision in the ETA applies to zero-rate or exempt the supply.
Section 1.1 of Part II of Schedule VI requires that for the purposes of zero-rating the supply of any medical or assistive device listed in Part II, other than in section 33 (Footnote 1), the medical or assistive device must be designed for human use or for assisting an individual with a disability or impairment.
In addition, section 1.2 of Part II of Schedule VI provides that a cosmetic service supply, and any supply of property or service that is in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes, is not zero-rated under Part II. A “cosmetic service supply” is defined in section 1 of Part II of Schedule V to mean a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.
According to the facts, the Product is a topical wound dressing. The Product’s use of nanomaterials in wound management represents a unique tool that is designed to closely reflect the underlying physiological processes in tissue repair. Therefore, the Product is not a supply in respect of a cosmetic service supply, rather, it is designed for human use to assist an individual in the process of healing. However, the Product does not fall under any of the zero-rating provisions of Part II of Schedule VI, nor does the supply of it fall under any of the exemptions from the GST/HST set out in Schedule V either. Consequently, the supply of this Product is subject to the GST/HST at the applicable rate depending on the province in which the supply is made.
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(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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-553-4626. 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,
Amal Khorchid
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings
1 Section 33 of Part II zero-rates a supply of an animal that is or is to be specially trained to assist an individual with a disability or impairment with a problem arising from the disability or impairment, or a supply of a service of training an individual to use the animal, if the supply is made to or by an organization that is operated for the purpose of supplying such specially trained animals to individuals with the disability or impairment.
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