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: 197277r
Dear [Client]:
Subject: GST/HST RULING
[…][Supplies of acne scar treatments]
Thank you for your letter of [mm/dd/yyyy], in which you requested that we reconsider the goods and services tax/harmonized sales tax (GST/HST) ruling that was issued to you [previously][…], concerning services rendered by […] (the Doctor) to treat […][the] acne scars [of ] [individual X].
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
Based on your faxes […], and our additional research, we understand the following:
1. […][individual X] received treatments for facial scarring caused by acne vulgaris at […] (the Clinic) […]. […][Information about the treatments].
2. […][Information about the Clinic]
3. The Doctor is a naturopathic physician and licensed cosmetic health care practitioner who performed the treatments on [individual X]. The treatments involved various methods including minor surgical procedures. […].
4. The Doctor is registered with the College of Naturopathic Physicians of British Columbia (the “College”) and is authorized to practise naturopathic medicine. […].
5. A naturopathic physician registered with the College may perform aesthetic procedures if they are certified to do so. The Doctor has the […][required] certifications from the College in respect of aesthetic procedures:
[…] (Footnote 1)
6. […].
7. At the time of […][the] treatments, [individual X] had not been granted authorization for the treatment of […] acne scars with the Medical Services Plan (MSP), which is the public health insurance in British Columbia. MSP covers the cost of medically-necessary insured hospital and doctor services for residents of BC.
8. […], the Doctor billed you for the services.
9. The Doctor stated that he did not perform medically-necessary MSP-covered procedures. […]
10. The professional opinion of the Doctor was that the services rendered to [individual X] were done for cosmetic purposes rather than for medical or reconstructive purposes.
11. […][Information about individual X]
12. You quoted the Medical Services Commission Payment Schedule (the MSC Payment Schedule), which is issued by the BC Ministry of Health to list benefits covered under the MSP, stating that the BC Ministry of Health covers facial scarring procedures such as the ones described in section “D.9.2.1 Trauma Scars” and in subsection “D.9.1 General” of the Schedule under the MSP. […].
13. You quoted a portion of the statutory guidelines described in the Budget Plan 2010, Annex 5, in Sales Tax Measures under ‘GST/HST and Purely Cosmetic Procedures’:
“A cosmetic procedure will continue to be exempt if it is required for medical or reconstructive purposes, such as surgery to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.”
14. […]
15. You submit the following dermatological definition of acne, by citation of the Canadian Medical Association and the U.S. National Institute of Health (Footnote 2) :
“Acne is one of the most burdensome diseases globally. Its prevalence among
those aged 12 to 24 years is estimated to be 85%, although it can persist beyond
young adulthood despite treatment. Acne can adversely affect quality of life and
may lead to emotional distress and physical scarring.”
You state, citing authoritative references, that “the international medical community defines acne (medical term acne vulgaris) as a disfiguring skin disease, which can cause severe scarring deformities, and a very negative impact on a patient's well-being.” (Footnote 3)
[…].
RULING REQUESTED
You request to formally appeal the ruling provided in our letter dated [mm/dd/yyyy]. Although there is no formal appeal process for persons who disagree with a ruling or an interpretation, the CRA will reconsider a ruling or interpretation if requested to do so, as indicated in the GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
You would like to know if the services supplied by the Doctor were subject to GST/HST, or if they were exempt.
RULING GIVEN
After careful consideration of your submission and the facts set out above, we rule that the supplies of acne scar treatments rendered by the Doctor to [individual X] are not exempt supplies.
EXPLANATION
Generally, the supply of a service made in Canada is subject to the GST/HST at the rate of 5%, 13%, or 15% (depending on the province in which the supply is made) pursuant to section 165, unless the supply is specifically relieved under the ETA. Exempt supplies are not subject to the GST/HST and are listed in Schedule V. Zero-rated supplies (supplies taxable at the rate of 0%) are listed in Schedule VI.
Part II of Schedule V lists supplies of particular health care services that are specifically identified as exempt supplies. If a supply of a particular health care service is not exempt pursuant to Part II of Schedule V, then the supply of the service would be subject to GST/HST at the applicable rate, depending on the province in which the supply is made, unless another relieving provision in the ETA applies to the supply.
ETA Provisions
Section 9 of Part II of Schedule V, in part, exempts a supply of any service but only if, and to the extent that, the consideration for the supply is payable or reimbursed by the government of a province under a plan established under an Act of the legislature of the province to provide for health care services for all insured persons of the province. In this case, none of the services provided by the Doctor were covered under the MSP. Therefore, section 9 of Part II of Schedule V does not apply in this case to exempt the services in question.
Section 7 of Part II of Schedule V, in part, exempts a supply of a naturopathic service if the service is rendered to an individual by a practitioner of the service. The exemption for supplies of such naturopathic services was added in an amendment to the ETA in 2014 and applies to supplies made after February 11, 2014. Supplies of naturopathic services made before that date would be taxable at the applicable rate in the province in which the supply was made. Therefore, any supplies of treatments rendered by the Doctor prior to February 12, 2014 would not have been exempt from the GST/HST.
Section 1 of Part II of Schedule V defines a “practitioner” in respect of a supply of a naturopathic service, to mean a person who
a) practises the profession of naturopathy as a naturopathic doctor,
b) where the person is required to be licensed or otherwise certified to practise the profession in the province in which the service is supplied, is so licensed or certified, and
c) where the person is not required to be licensed or otherwise certified to practise the profession in that province, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province.
In this case, at the time the services were provided, the Doctor was registered with the College and was licensed, as required, to practise the profession of naturopathic medicine in British Columbia when providing services to [individual X]. Therefore, the Doctor was a practitioner in respect of naturopathic services for GST/HST purposes, and supplies of naturopathic services rendered to [individual X] by the Doctor could potentially have been exempt pursuant to section 7 of Part II of Schedule V (subject to the information below).
However, the application of section 7 of Part II of Schedule V is limited by sections 1.1 and 1.2 of that Part. Sections 1.1 and 1.2 of Part II of Schedule V generally deem supplies that are made for cosmetic purposes and supplies that are not qualifying health care supplies to not be included in Part II of Schedule V.
Section 1.1 of Part II of Schedule V
A supply that is a cosmetic service supply or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes, is generally deemed under section 1.1 of Part II of Schedule V not to be included in Part II of Schedule V, and therefore, cannot qualify for exemption under section 7 of Part II of Schedule V. 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”.
Acne scar treatment rendered by a naturopathic doctor for the purpose of alleviating or correcting a deformity or other significant defect in appearance arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or from a disfiguring disease would not be prohibited from being exempt under section 7 of Part II of Schedule V due to section 1.1 of Part II of Schedule V. In contrast, acne scar treatment procedure to enhance aesthetic appearance where there is no abnormal body structure or symptoms causing a degree of impairment, recurrent infection, pain, etc., nor to treat a medical condition, would be considered to be provided for cosmetic purposes only and, therefore, section 1.1 of Part II of Schedule V would apply, and the service would not be exempt under section 7 of Part II of Schedule V.
The distinction between the purposes for which a supply is made is not always clear. Generally, the CRA does not make a determination as to the medical or reconstructive necessity of a particular procedure and instead relies on the views of the medical profession as well as the guidelines of the provinces, given that the provincial governments have jurisdiction over the delivery of health care services within their respective jurisdictions.
Qualifying health care supply
In addition, section 1.2 of Part II of Schedule V provides, in part, that for the purposes of Part II of Schedule V, a supply that is not a qualifying health care supply is deemed not to be included in Part II of that Schedule.
The expression “qualifying health care 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 the purpose of
a) maintaining health,
b) preventing disease,
c) treating, relieving or remediating an injury, illness, disorder or disability,
d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or
e) providing palliative health care.”
For more information on the expression “qualifying health care supply”, please refer to GST/HST Notice 286, Draft GST/HST Policy Statement – Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.
Therefore, any supplies made which are cosmetic service supplies (or in respect of a cosmetic service supply) or which are not qualifying health care supplies would not be exempt of the GST/HST under section 7 of Part II of Schedule V.
Tax status of Doctor’s services
Regardless of whether the Doctor performed his services within, or outside, the scope of his field of practice, the GST/HST impact will be the same. […]
If the Doctor’s services were within the scope of practice for naturopathic physicians, then his professional opinion is important in this situation in determining the nature of the services he provided. In this situation, the Doctor concluded that he was performing cosmetic services.
As the supplier of the services, the Doctor is responsible for determining the tax status of the supply. Section 1.1 of Part II of Schedule V requires that the supplier determine if the supply is made for medical or reconstructive purposes. It is a question of fact whether a cosmetic procedure rendered to a particular individual has a medical or reconstructive purpose and is determined in a case-by-case basis. Accordingly, the opinion of the health care provider, who is authorized under provincial legislation to render the service to the patient within their scope of practice, is necessary in making the determination of the medical or reconstructive necessity with respect to the patient’s unique circumstances.
The Doctor is a naturopathic physician who is registered with the College; additionally, the Doctor has the required certifications to perform aesthetic procedures. The professional opinion of the Doctor was that the services rendered to [individual X] were done for cosmetic purposes rather than for medical or reconstructive purposes. […]
As stated above, when determining if a procedure is done for cosmetic purposes the guidelines of the province would also be taken into consideration. Where a procedure meets the guidelines of the province the procedure would be considered to be done for medical or reconstructive purposes regardless if the procedure was covered by the provincial health care plan or not.
You have provided information to us which indicates that acne can be a severe problem that is not a cosmetic issue. In this particular case, the Doctor’s view is that his services were not performed for medical or reconstructive purposes, but rather were performed for cosmetic purposes. […].
Therefore, based on the professional opinion of the Doctor and the guidelines of the province, the supply of acne scar treatments rendered to [individual X] would be a “cosmetic service supply” as defined in section 1 of Part II of Schedule V.
As indicated above, section 1.1 of Part II of Schedule V generally provides that a supply that is a cosmetic service supply, or a supply in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes, is deemed not to be included in Part II of Schedule V and therefore cannot be exempt of the GST/HST under section 7 of Part II of Schedule V. Where the Doctor’s services were within the scope of practice for his field of practice, the supplies of the Doctor’s services would have been taxable.
[…]
Additional information – Tax paid in error
In regard to the notion of recovery of tax paid in error, we provide the following for your information.
Where a supplier has charged or collected an excess amount as or on account of tax on supplies that qualify for zero-rating, it may refund or credit the excess amount to the recipient in accordance with section 232. Of note, however, is that if the supplier refunds or credits the amounts collected as GST/HST, it must do so within two years after the day the amount was charged or collected and it must provide the recipient with a credit note (unless the recipient issues a debit note) containing prescribed information.
Alternatively, persons who have paid an amount as GST/HST on supplies that qualify for exemption may make an application to the CRA for a rebate of the amount paid in error pursuant to section 261 using Form GST189, General Application for Rebate of GST/HST. The time limit to apply for this rebate is within two years after the day the amount was paid.
For more information, refer to GST/HST Memorandum 12.2, Refund, Adjustment, or Credit of the GST/HST under Section 232 of the Excise Tax Act and Guide RC4033, General Application for GST/HST Rebates.
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. The additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-552-7297. 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
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
FOOTNOTES
1 [...]
2 Authorities you indicated are at https://www.crnaj.ca/content/cmaj/188/2/118.full.pdf and
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4732962/
3 Authorities you indicated are Kaminer MS, Gilchrest BA. The many faces of acne. J Am Acad Dermatol. 1995;32:S6-14. 2. Stern RS. Dermatologists and office-based care of dermatologic disease in the 21st century. J lnvestig Dermatol Symp Proc. 2004;9:126-130. 3. Stathakis V, Kilkenny M, Marks R. Descriptive epidemiology of acne vulgaris in the community. Australas J Dermatol. 1997;38:115-123
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