21 September 2006 GST/HST Ruling 44066 - XXXXX Pita Chips - XXXXX

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:

The purpose of this letter is to respond to your ruling request XXXXX and our subsequent telephone discussions regarding the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to supplies of independent medical examination ("IME") reports that are supplied by XXXXX to insurance companies.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. For information on the transitional rules for the reduction of the GST/HST rate, please refer to Reduction in the Rate of the GST/HST - Questions and Answers on the Canada Revenue Agency Website at (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html).

All legislative references are to the Excise Tax Act (the "ETA") and the regulations therein, unless otherwise specified.

Statement of Facts

You advised that XXXXX sells a service to insurance companies, which includes IME reports. On the basis of your letter and our discussions we understand that:

1. To supply the IME reports, XXXXX contracts with medical practitioners for the preparation of the reports. The medical practitioners supply the IME reports to XXXXX.

2. XXXXX does not operate a facility for the preparation of the IME reports. Rather, the medical practitioners conduct the IME and prepare the report at other locations.

3. According to the XXXXX website noted in your letter XXXXX, XXXXX contracts with medical professionals to provide insurance medical examinations on a mobile basis. That is, the examinations take place at the home or place of business of the insurance company's client. The medical professionals work as "independent contractors" and have the flexibility to determine their own hours and availability, and decide what volume of work they wish to complete.

4. XXXXX invoices the insurance company for the supply of the completed IME report. The consideration for this supply includes an arranging fee or set-up fee, and XXXXX bills its customer (i.e., the insurance company) this fee as well as an amount to cover the cost of the IME report, which was supplied to, and paid by, XXXXX.

Ruling Requested

You would like confirmation that XXXXX is required to collect the GST/HST on the consideration it charges insurance companies for the supply of IME reports.

Ruling Given

Based on the facts set out above, we rule that XXXXX is required to collect the GST/HST on the consideration it charges insurance companies for the supply of IME reports. The tax is calculated on the value of the consideration for this supply which is the total amount charged by XXXXX to the insurance companies. That is, the value of the consideration includes the recovery of XXXXX expenses incurred to make this supply and its arranging or set-up fee.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is 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.

Explanation

The general rule under the ETA is that supplies of property and services are subject to the GST/HST at the rate of 6% or 14% (as previously noted prior to July 1, 2006, the rates were 7% and 15% respectively). Part II of Schedule V contains specific exemptions for certain health care services when they are provided by a supplier that is identified in that Part.

For example, sections 5 and 7 of Part II of Schedule V exempt from GST/HST certain supplies made by a "medical practitioner" or a "practitioner", as those suppliers are defined in section 1 of that Part. In particular, section 5 exempts a supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual.

Section 2 of that Part exempts a supply made by the operator of a health care facility of an institutional health care service if the service is rendered to a patient or resident of the facility. The ETA defines "health care facility" and "institutional health care service" for purposes of this Part.

These exempting provisions do not apply to services supplied by other persons, as these persons do not meet the legislative criteria of being a supplier as defined for purposes of these provisions. On the basis of the information provided, it is our view that neither section 2, 5 or 7 of Part II of Schedule V would apply to the supplies of IME reports made by XXXXX.

That is, we understand that XXXXX does not operate a health care facility. Therefore its supplies do not constitute exempt institutional health care services rendered to patients of a health care facility. In addition, XXXXX is not a "medical practitioner" or a "practitioner" as defined in the ETA. XXXXX does not hold a licence to practise the profession of medicine in its name, nor does it practise a profession listed in the definition of "practitioner".

Please note that in general, where a person such as XXXXX subcontracts with a medical practitioner in the course of making supplies, whether these supplies are health care services rendered to an individual, the person's supplies are not exempt under section 5 of Part II of Schedule V because the person is not a medical practitioner for ETA purposes. The fact that the subcontractor may be a medical practitioner does not confer any benefit to the person such that the person would also qualify as a medical practitioner. Each person is a separate legal entity and its status as a supplier is evaluated separately from other persons that it subcontracts with in the course of making its supplies.

Please note that the Canada Revenue Agency has just released Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. The policy statement can be found under the GST/HST Policy Statements link at (http://www.cra-arc.gc.ca/menu/GTPP_200-e.html) on the Canada Revenue Agency Web site. The policy represents a change in the Canada Revenue Agency's position concerning the application of the GST/HST to sections 5 and 7 of Part II of Schedule V to the ETA and it describes the circumstances under which IMEs and other independent assessments will be exempt from the GST/HST under these provisions as well as under section 2 of that Part. However, as explained above, these exempting provisions do not apply to XXXXX; therefore, the policy will not impact the supplies made by XXXXX.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/10/25 — RITS 64854 — [Application of the Point-of-sale Rebate on Printed Books]