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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 14th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 114903
Business Number: [...]
June 20, 2011
Dear [Client]:
Subject:
GST/HST RULING
[...] Incontinence Product
Thank you for your letter of May 20, 2009, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a [...] incontinence product. We apologize for the delay in our response.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the facts to be:
1. [...] [(the Company) is a resident of Canada and is a GST registrant, having been granted BN# [...].
2. [The Company] is in the business of supplying medical devices for the treatment of a number of different medical conditions, including incontinence. Incontinence refers to the involuntary loss of urine from the bladder. Among women, the problem is most commonly associated with a specific condition called Stress Urinary Incontinence.
3. [The Company] has developed a number of [...] incontinence products, each of which is generally referred to as [...]
4. The above incontinence products supplied by [the Company] share common functional characteristics, purpose and componentry with the only practical difference being the placement of the [...] location. Each [...] [Product] comprises two components:
a. [...][Component 1], which is a mesh sling that supports the urethra by passing two sides of a thin polypropylene mesh on each side of a patient's urethra, and stabilizes it;
b. [...][Component 2], which is a tool designed specifically to insert [Component 1] into position under the urethra to allow the desired tension to be achieved. [Component 2] is extracted as soon as [Component 1] is in place.
In all instances, [Component 1] is supplied by [the Company] as part of a [Product] that includes the [Component 2] used to implant the particular [Component 1] with which it is supplied. In all instances, the [Product] is supplied for a single consideration with no indication of an independent value for either [Component 1] nor [Component 2].
5. [Component 1] is permanently implanted in the patient and provides appropriate support to the urethra to correct urinary incontinence over time. The benefit of the product is thereby gained from [Component 1] itself.
6. [...]
7. The [Product] is placed in a patient through a surgical procedure performed at a hospital facility by a surgeon. In performing this procedure, the surgeon uses [Component 2] to place [Component 1] [...] thereby [...] reducing or eliminating incontinence. The effectiveness of the procedure depends upon the precise placement of [Component 1]. Without the particular [Component 2] that is specifically designed for and supplied together with a particular [Component 1], a surgeon would not be able to place [Component 1] with the necessary precision, thereby rendering [Component 1] much less effective in the treatment of urinary incontinence.
8. The [Product] is licensed by Health Canada to be a single use system only. Neither [Component 1] nor [Component 2] used to implant [Component 1] are designed or licensed for multiple uses.
9. The products are sold by [the Company] only to health care facilities. Each supply of the property is supplied for a single price.
10. The recipients of the supplies do not have an option to acquire the elements of the [Product] separately or to substitute elements of the package. You mention that while similar incontinence treatment devices could be sold independent of the delivery tool, [the Company] has advised that based on its experience, these have not been successful in the marketplace, and that as a result of the integral relationship between [Component 1] and [Component 2], they are sold together by [the Company] as the [Product]. You mention that marketing material and packaging show [Component 1] and [Component 2] components of the [Product] sold together as a single supply. [Component 1] is the core of the product. If a person requires a [Component 1], then the rest of the product ([Component 2]) is a necessity in order to place [Component 1] into the position required for it to be effective. Separation of [Component 2] from [Component 1] would destroy the usefulness of [Component 1] itself as an incontinence product.
11. [Component 2] is comprised of [...]. It is specially designed for placement of [Component 1] incontinence product into the appropriate position under the urethra. [...]
Further, [Component 2] of the [...] product has unique features specially designed for the placement of [Component 1] particular to that product. For example, [...]
12. The implant is permanent. The [Product] supports the urethra to correct urinary incontinence - the urethra does not support itself in these cases so this device corrects the natural function of the urethra. The purpose of this device is to cure incontinence. Health Canada licensed [Component 2] and [Component 1] to be used together only.
13. You believe [Component 2] is fundamentally different from a scalpel in that it is a single purpose and single use device, whereas a scalpel or comparable instrument is a multiple purpose and multiple use device, being used repeatedly for a number of varied surgical procedures. You add that a [Component 2] is never under any circumstance supplied independently of a [Component 1], whereas a scalpel or other comparable instrument is typically supplied independently of any other property. [Component 2] is a single use device and has a single purpose, being the placement of [Component 1]. Other than its use in placing [Component 1], you feel there is no ongoing benefit derived from [Component 2]. You consider [Component 2] to be a facilitative instrument subordinate to the main objective, which is the provision of a [Component 1] to correct a medical problem.
14. In the event that this may be considered as a multiple-supply situation, you feel that both parts are zero-rated anyway, the supply of [Component 1] being a supply of an incontinence product that is zero-rated under section 37 of Part II of Schedule VI, and the supply of [Component 2] being a supply of a "part, accessory or attachment" that is zero-rated under sections 37 and 32 of Part II of Schedule VI.
Ruling Requested
You would like to know if the provision of a [Product] made by [the Company] is a single supply of an incontinence product and if it is zero-rated under section 37 of Part II of Schedule VI.
If the provision of the [Product] consists of multiple supplies, you would like to know if the supply of [Component 1] is a supply of an incontinence product that is zero-rated under section 37 of Part II of Schedule VI, and if the supply of [Component 2] is a supply of a part, accessory or attachment that is zero-rated under section 32 of Part II of Schedule VI.
Ruling Given
Based on the facts set out above, we rule that the supply of a [Product] made by [the Company] is a single supply of a surgical prosthesis that is designed to be worn by an individual, and is thus zero-rated under section 25 of Part II of Schedule VI to the ETA.
[...] there is no need to address the issue of whether the supply is zero-rated under section 37 of Part II 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4390. 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,
John Ware
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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