Dear XXXXX
I am writing in response to your letter of May 21, 1996 regarding the Goods and Services Tax (GST) in general and in particular, the implications of the GST on exempt and taxable services provided by self-employed nurses.
As you know the GST is a 7% tax levied on the majority of goods and services supplied in Canada. The GST, which has been in effect since January 1, 1991 replaced the Federal Sales Tax (FST) which was a tax levied on the manufacturers' sale price of most goods.
A person who is registered for the GST is required to collect and account for the GST on the taxable supplies that the person makes in the course of a commercial activity in Canada. A person is a GST registrant once they have voluntarily registered for the GST or once they are required to be registered for the GST. If a person is not a GST registrant, the person is generally not required to collect any GST.
When a person makes taxable supplies in the course of a commercial activity in Canada, that person is required to be registered for the GST provided that person is not a "small supplier". If a person does not voluntarily register for the GST, the person is a small supplier until the time the person surpasses $30,000.00 gross taxable sales (the threshold) either in one calendar quarter or cumulatively in four calendar quarters. Where a person surpasses the threshold in one calendar quarter, the person ceases to be a small supplier immediately prior to making the supply that put the person over the threshold. Where a person surpasses the threshold in the fourth of four consecutive quarters, the person ceases to be a small supplier at the end of the month following the fourth quarter.
The GST is payable on all taxable supplies, made in Canada, by a registrant. The legislation defines taxable supply as a supply made in the course of a commercial activity, which by definition excludes an exempt supply. It does not apply to services provided by employees to employers. As well, certain goods and services are not subject to the GST, these fall into two distinct categories:
Zero-rated supplies are "taxable supplies", but they are taxed at a rate of 0%. This means a business selling zero-rated supplies receives a full credit (known as an input tax credit (ITC)) for the GST paid on all business inputs related to the sale of these items. However, no GST is built into the final price that a consumer pays for the item.
Exempt supplies are not subject to the GST. From the consumer's point of view there is no apparent difference between a zero-rated and an exempt supply. However, suppliers of any exempt service are not considered to be engaged in a commercial activity for purposes of the GST. As a result, they are not required to either register for, collect or remit the GST, nor are they entitled to claim ITCs. Consequently, any person providing an exempt service is not entitled to any credit or refund for the GST paid on its purchases or expenses.
Most health care services are exempt from the GST. As well, a wide range of medical and assistive devices, and all drugs prescribed by a medical practitioner are zero-rated. Consequently, patients do not pay the GST on such purchases.
Virtually all services provided by medical professionals, such as physicians and dentists, including services provided by other health care professions such as nursing, dental hygiene, physiotherapy and optometry are exempt from the GST. However, to qualify for the exemption, health care practitioners must meet certain regulatory and licensing criteria.
The GST exemption applies to all health care services covered under provincial health care plans.
With respect to services provided by nurses, section 6 of Part II of Schedule V to the Excise Tax Act (ETA) exempts the supply of a nursing service rendered by a registered nurse, a registered nursing assistant or a licensed practical nurse, where
"(a) the service is rendered to an individual in a health care facility or in the individual's place of residence;
(b) the service is a private-duty nursing service; or
(c) the supply is made to a public sector body."
The term "nursing service" is not defined in the ETA. The Department's policy is that only those services traditionally recognized as nursing services qualify as exempt nursing services pursuant to section 6 of Part II of Schedule V to the ETA. A self-employed registered nurse providing such a supply is not required to either register for, collect or remit the GST, nor is he/she entitled to claim ITCs.
There are no provisions in the ETA to exempt services such as, completing questionnaires or health assessments, collection of body fluids for the purpose of obtaining life insurance, processing insurance, disability, or rehabilitation claims, taking physical measurements, performing limited paramedical examinations or obtaining attending physician's statements, diet/weight/psychological counseling, occupational nursing, teaching CPR/First Aid, or pre-post natal courses to name a few. Consequently, these and similar services provided by self-employed registered nurses are taxable at the rate of 7%. As such, the nurse will be required to register, collect and remit the GST from their taxable supplies. GST paid on their purchases and expenses will be refunded by way of ITCs.
As you know, the Department of National Revenue administers the GST legislation as passed by Parliament. Your goal to add a statutory provision relieving other types of services provided by registered nurses is essentially a tax policy matter which is the direct responsibility of the Department of Finance. I suggest your concerns be brought to their attention.
If you have any questions regarding this matter, please contact me at 954-7656 or Lance Dixon at 952-9264.
Yours truly,
Adrien Venne
Director
Public Service Bodies & Government
GST Rulings and Interpretations
Policy and Legislation
| c.c.: |
Lance Dixon
Enikö Vermes
Paule Labbé,
Tax Policy Officer
Department of Finance. |
XXXXX
File: 11850-2/o
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