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: 184503
Dear [Client]:
Subject: GST/HST INTERPRETATION
Meaning of the word "diagnostic"
Thank you for the letter […] of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to […][Test X] . The request is to obtain clarifications regarding the meaning of the word “diagnostic”. We apologize for the delay in our response.
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 that:
1. […]
2. […][General information about supplies of in vitro tests].
3. […][General information about in vitro Test X].
4. […][Test X is an in vitro test] that assesses the probability of […][a condition] (Footnote 1).
5. […][Test X results] will not […][confirm the presence or absence of a condition] (Footnote 2)
6. […][Information about testing] (Footnote 3)
7. […][More information about testing] (Footnote 4)
8. […]
INTERPRETATION REQUESTED
You would like to know the meaning of the word “diagnostic” as referred to in Notice 248 – Application of the GST/HST to Supplies of In Vitro Diagnostic Test Kits.
INTERPRETATION GIVEN
In general, every recipient of a taxable supply (other than a zero-rated supply) made in Canada is required to pay GST/HST at the rate of 5%, 13%, or 15% (depending on the province in which the supply is made) on the value of the consideration for the supply, pursuant to section 165.
Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI. Part I of Schedule VI lists supplies of certain prescription drug and biological items that are zero-rated. In order for a supply of property or a service to be zero-rated under Part I of Schedule VI, a specific zero-rating provision included in that Part must apply to the supply.
Section 2 of Part I of Schedule VI zero-rates, in part, a "supply of any of the following drugs or substances:
(a) a drug included in Schedule C or D to the Food and Drugs Act,
(...)
but not including a supply of a drug or substance when it is labelled or supplied for agricultural or veterinary use only."
The Tax Court of Canada (TCC) decided in Centre Hospitaller 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.
In sum, [to be considered] an “in vitro diagnostic test” […][for GST/HST purposes]:
* The test is for use in the diagnosis of a disease in humans and;
* The test contains at least one of the four substances listed above.
While the ETA does not define the term “diagnosis”, the CRA considers that the term in question, 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. Our research reveals that other sources support the CRA’s current interpretation. The 32nd Edition of Dorland’s Medical Dictionary defines “diagnosis” as “the determination of the nature of a case of disease”. The Oxford Concise Medical Dictionary defines “diagnosis” as “the process of determining the nature of a disorder by considering the patient’s signs and symptoms, medical background, and – when necessary – results of laboratory tests and X-ray examinations”.
Jurisprudence in regards to “screening tests” and “diagnostic tests” confirms that there is a distinction to be made between the two. In Armstrong v. British Columbia (Ministry of Health), 2010 BCCA 56 (Footnote 5) , the Honourable Mr. Justice Tysoe states at paragraph 2 that :
“A test for screening purposes is treated differently than a test for diagnostic purposes […]. The distinction is that there must be a reason to suspect cancer before a test can be ordered for diagnostic purposes, while a screening test is done solely as a precaution.”
It is clear from this Court decision that screening tests are different from diagnostic tests and accordingly, it is normal that they are treated and regulated differently.
[…] [Test X assesses the probability of a condition but Test X results do not confirm the presence or absence of a condition] Therefore, it is not used in the diagnosis of a disease in humans, as it does not detect or identify a disease.
If you require clarification with respect to any of the issues discussed in this letter, please call Art Blommesteijn directly at 343-573-6076. 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,
Kassandra Leonard
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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