Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 119047
Attention: XXXXX
XXXXX
March 25, 2010
Dear Mr. XXXXX:
Subject:
GST/HST INTERPRETATION - Tax Status of Diagnostic Products
Thank you for your XXXXX of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to diagnostic products following the July 20, 2007 decision of the Tax Court of Canada ("TCC") in Centre Hospitalier Le Gardeur et al v The Queen [2007] ETC 3101 ("the Decision").
We understand that you have concerns in respect to invoicing difficulties that have arisen as a result of the Decision. Specifically, XXXXX concerns are as follows:
1. The Decision has created a situation where some, but not all, diagnostic products are being treated by some customers as zero-rated. Purchase orders issued by customers have some products identified as taxable and some as zero-rated. Vendors are not able to label the tax status of products in their system database as taxable or zero-rated because the customers have their own respective interpretation of the Decision.
2. There has been no administrative guidance from the Canada Revenue Agency ("CRA") to assist in the application of the Decision by vendors and customers. You understand that the Decision was in respect of a specific list of products; however the list has not been provided to the vendors and customers.
3. Customers are often "short-paying" invoices as their interpretation of the Decision is that certain items should be zero-rated for GST/HST purposes. However there are inconsistent interpretations of the Decision by both vendors and customers.
4. Vendors are unsure where the potential tax liability for this unpaid GST/HST rests. These "short-payments" are causing costly and unnecessary administrative inefficiencies.
Interpretation Requested
You would like the CRA to clarify the application of the GST/HST to diagnostic products.
Interpretation Given
It has been the CRA's position that supplies of in vitro diagnostic test kits designed for laboratory use are subject to the GST/HST. However, the TCC decided in the Centre Hospitalier Le Gardeur's case that certain in vitro diagnostic test kits are zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI to the ETA.
The CRA is currently reviewing the impact of the TTC decision, which is dated July 20, 2007.
In the interim, the CRA has adopted an administrative position which is in keeping with the TCC decision. This administrative position, described below, also appears in GST/HST Notice No. 248 Application of the GST/HST to Supplies of In Vitro Diagnostic Test Kits, available on the CRA's web site at http://www.cra-arc.gc.ca. This position applies from the date of the TCC decision until such time as the CRA review in this matter is completed.
The CRA's administrative position is that the supply of an in vitro diagnostic test kit is zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI 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.
Suppliers of in vitro diagnostic test kits containing one or more of the four above-listed substances may sell such products on a zero-rated basis. Conversely, in vitro diagnostic test kits which do not contain one or more of these substances will be subject to the GST/HST.
You will also find in the GST/HST Notice No. 248 some guidance for suppliers and customers where GST/HST was collected and remitted during the interim period.
The CRA will announce its final decision on this issue once its review is completed. Please note that any change to the CRA's position, should one occur, will be effective on a prospective basis.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-941-3268. 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,
Chantal Desrosiers
Manager
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
XXXXX
UNCLASSIFIED
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