14 June 2004 GST/HST Interpretation 46389 - Partnerships

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.

This is in reply to your electronic message XXXXX and our subsequent discussions, including my electronic message XXXXX, on whether supplies of certain drugs are zero-rated under paragraph 2(d) of Part I of Schedule VI to the Excise Tax Act (the "ETA"). In particular, you are asking whether supplies of cannabis marihuana, cocaine and heroin are zero-rated supplies for purposes of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST").

A zero-rated supply for purposes of paragraph 2(d) of Part I of Schedule VI to the ETA is as follows:

"a drug that contains a substance included in the schedule to the Narcotic Control Regulations, other than a drug or mixture of drugs that may be sold to a consumer without a prescription pursuant to the Controlled Drugs and Substances Act or regulations made under that Act,"

To fall within this provision, the product in question must meet three conditions:

(1) it must be a drug;

(2) it must contain a substance included in the schedule to the Narcotic Control Regulations (the "NCR"); and

(3) it must not be permitted by the Controlled Drugs and Substances Act (the "CDSA") or regulations made under that Act, to be sold without a prescription.

That is, the meaning of "other than a drug or mixture of drugs that may be sold to a consumer without a prescription" is that the CDSA or its regulations must exclude the drug or mixture of drugs from a prescription requirement.

We note that the drugs in question may also be referred to as narcotics, as "narcotic" is described in the NCR as a substance set out in the schedule to those regulations. The NCR sets out the conditions under which narcotics generally may be sold to consumers with or without a prescription.

As provisions in the NCR allow for the sale of narcotics to consumers without a prescription, supplies of narcotics, which include cannabis marihuana, cocaine and heroin, do not meet the third condition of paragraph 2(d) of Part I of Schedule VI to the ETA. Therefore, these supplies would be subject to the GST/HST at the rates of 7% and 15%, unless another ETA provision applies, such as section 3 of Part I of Schedule VI (Section 3 of Part I of Schedule VI to the ETA zero-rates the following supplies: (1) a drug dispensed by a medical practitioner to an individual for his or her personal consumption or use; and (2) a drug dispensed by a pharmacist on the prescription of a medical practitioner for the personal consumption or use of the individual named in the prescription.).

Should you have any additional questions, please do not hesitate me at (613) 952-6761.

2004/05/28 — RITS 47263 — [Application of the GST/HST on Certain Operations of a Long-term Care Facility]