8 October 2004 GST/HST Ruling 53262 - Timeshare Resort Points / Default by Purchasers of Points

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.

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of imported medical devices.

You are involved in preparing and processing various customs coding forms (e.g. Form B3, Canada Customs Coding Form). The information used to prepare these documents is coded and placed in a designated area on the coding form referred to as a field. A field on the customs form requires a GST rate or a GST status code to be entered in respect of the importation of medical devices.

Interpretation Requested

For purposes of preparing customs coding forms, what is the GST status of medical devices at time of import? What happens if an incorrect GST status code is used?

Interpretation Given

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or the HST rate of 15%, as applicable, on the value of the consideration for the supply. Where, however, a supply is a zero-rated supply, the tax rate in respect of that supply is 0%.

Part II of Schedule VI to the Excise Tax Act (ETA) provides zero-rated status for supplies of most medical and assistive devices, some of which are zero-rated in their own right and some only when supplied on the written order of a medical practitioner.

Section 6 of Schedule VII to the ETA, allows goods included in Parts I to IV and VIII of Schedule VI to the ETA to be treated as non-taxable importations pursuant to section 213 of the ETA.

Therefore, if an imported supply of medical devices is included in Part II of Schedule VI to the ETA at time of importation it is considered a non-taxable importation. If a supply of a medical device is not included in Part II of Schedule VI at time of importation it is considered a taxable importation and Division III tax would apply.

For example, a supply of insulin syringes is an unconditionally zero-rated supply pursuant to Part II of Schedule VI to the ETA (section 21) therefore; the importation of insulin syringes would be a non-taxable importation. However, a supply of a catheter for sub-cutaneous injections is zero-rated only when it is supplied on the written order of a medical practitioner for use by a consumer named in the order (section 21.2). A supply of catheters is not zero-rated where the conditions in Part II of Schedule VI are not met. Likewise, an imported supply of catheters is not a non-taxable importation where the conditions in Part II of Schedule VI are not met at time of importation.

Section 4.2 of Chapter 4 of the GST/HST Memoranda Series, Medical and Assistive Devices provides detailed information on zero-rated medical and assistive devices for purposes of the GST. For your convenience, I have enclosed a copy of section 4.2 of Chapter 4 of the GST/HST Memoranda Series.

According to Appendix H of Customs Memorandum D17-1-10, Coding Of Customs Accounting Documents, status codes 56 to 65 apply to goods that are non-taxable by virtue of section 6 of Schedule VII to the ETA. In particular, code 57 applies to medical and assistive devices as enumerated in Part II of Schedule VI to the ETA.

When importing goods, it is the responsibility of the importer of record to ensure that the information declared in the accounting data is correct. According to subsections 216(2) and 216(3) of the ETA, any changes to the GST status of imported goods under Division III, are treated as if they were a determination, re-determination, or further re-determination of the tariff classification, or an appraisal, re-appraisal, or further re-appraisal of the value for duty of the goods. As a result, corrections affecting only the GST status of the goods (e.g., the incorrect use of a GST status code) must be submitted under section 32.2 of the Customs Act where there are amounts owing or revenue neutral. For example, a correction to change a GST status code to another GST status code. Furthermore, any GST amounts owing are subject to the interest and penalty provisions contained in the Customs Act that pertain to duty amounts owing.

The Customs Voluntary Disclosures Program (VDP) promotes compliance with the accounting and payment of duty and tax provisions under the Customs Act, Customs Tariff and Excise Tax Act, by encouraging clients to come forward and correct deficiencies in order to comply with their legal obligations. Please refer to Customs Notice N-332, Voluntary Disclosures Program for further information.

If GST status code 57 has been used incorrectly on a customs coding form, please refer to Customs Memorandum D11-6-6, Self-Adjustments To Declarations Of Origin, Tariff Classification, Value For Duty, And Diversion Of Goods, which outlines and explains the legislative framework and administrative guidelines for the "self adjustment process" relating to changes to the declarations of origin, tariff classification, value for duty, as well as the diversion of goods.

Furthermore, the Administrative Monetary Penalty System (AMPS) applies to contraventions of the Customs Act, the Customs Tariff and the Special Import Measures Act and the respective regulations, as well as contraventions of the terms and conditions of licensing agreements and undertakings. The AMPS does not pose any new obligations to comply with Customs legislation, regulations and undertakings. AMPS will not affect businesses that continue to comply with Customs requirements.

The AMPS is a civil penalty regime that secures compliance with Customs legislation through the application of monetary penalties. The AMPS will impose monetary penalties in proportion to the type, frequency, and severity of the infraction. Most penalties are graduated and will take the compliance history of the client into consideration.

Copies of Customs Memoranda, Notices and information on the AMPS can be found on the Canada Border Services Agency website www.cbsa-asfc.gc.ca.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8220.

Yours truly,

Kevin W. Smith
Border Issues Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/10/08 — RITS 53429 — Advertising Services XXXXX