11847-6(LFR)
September 14, 1995
Dear XXXXX
This is in response to your letter sent via facsimile transmission on August 16, 1995 in which you ask that we revisit one of several GST rulings/interpretations issued to XXXXX of XXXXX on April 20, 1995 in respect of XXXXX proposed cost-recovery initiatives. Specifically, you have asked that we review our position on the application of GST to fees payable to HC for drug submission evaluations.
As indicated to you and XXXXX during our meeting of June 20, 1995, the tax status of the cost-recovery initiatives proposed by XXXXX was determined on the basis of the information provided to us at that time.
Subsequent to our meeting, additional information concerning the implementation of the cost-recovery initiative in question was submitted for our consideration. This includes a "Notice of Compliance", a "DIN notice form, and a "Notice of Non-compliance".
For ease of reference we have repeated our understanding of the facts, the transactions and the purpose of the transactions in this matter, as outlined in our letter of April 20, 1995. New facts have also been added to reflect information obtained during our discussions as well as that provided to this office by you on August 16, 1995.
Statement of Facts
1. The "REGULATIONS PRESCRIBING THE FEES TO BE PAID BY CERTAIN USERS OR CLASSES OF USERS OF A DRUG SUBMISSION EVALUATION SERVICE PROVIDED BY THE XXXXX will come into force for fiscal year 1995-96. The short title for these regulations is the Drug Submission Evaluation Service Fees Regulations.
2. It is proposed that in accordance with the Drug Submission Evaluation Service Fees Regulations, a fee will be payable to XXXXX by any person who files a submission with XXXXX for an evaluation service under any of the Food and Drugs Regulations (FDR) provisions identified in the schedule to the Drug Submission Evaluation Service Fees Regulations. This evaluation service refers to the screening, clinical review, labeling, chemistry and the manufacturing of drugs.
The schedule indicates that information and material are filed with XXXXX for purposes of:
• filing a new drug submission pursuant to section C.08.002 of the FDR,
• filing a supplement to a new drug submission pursuant to section C.08.003 of the FDR
• filing an abbreviated new drug submission pursuant to section C.08.002.1 of the FDR
• filing a supplement to an abbreviated new drug submission pursuant to section C.08.003 of the FDR
• assigning a number, preceded by the letters "DIN", to a drug in accordance with subsection C.01.014.2(1) of the FDR, or
• assigning a number, preceded by the letters "GP", to a drug in accordance with subsection C.01.014.2(1) of the FDR.
3. Subsection C.08.002.(1) of the FDR states that "No person shall sell or advertise for sale a new drug unless (a) the manufacturer of the new drug has filed with the Minister ... a new drug submission relating to that new drug, having a content satisfactory to the Minister; (b) the Minister has issued a notice of compliance to that manufacturer of the new drug in respect of that new drug submission pursuant to section C.08.004 ..."
4. Subsection C.08.002.(2) of the FDR states that "A new drug submission shall include such information and material as the Director may require, and without limiting the generality of the foregoing, shall include
(a) a description of the new drug and a statement of its proper name or its common name if there is no proper name;
(b) a statement of the brand name of the new drug or the identifying name or code proposed for the new drug;
(c) a list of all ingredients of the new drug stated quantitatively, the specifications for the ingredients and, when the Director so requires, the names and addresses of the manufacturers of all the ingredients;
(d) a description of the plant and equipment to be used in manufacturing, processing and packaging the new drug;
(e) details of the method of manufacturing and the controls to be used in manufacturing, processing and packaging the new drug;
(f) details of the tests to be applied to control the potency, purity, stability and safety of the new drug;
(g) detailed reports of the tests made to establish the safety of the new drug for the purpose and under the conditions of use recommended;
(h) substantial evidence of the clinical effectiveness of the new drug for the purpose and under the conditions of use recommended;
(i) a statement of the names and qualifications of all the investigators to whom the new drug has been sold;
(j) a draft of every label to be used in conjunction with the new drug;
(k) a statement of all representations to be made for the promotion of the new drug respecting
(i) the recommended route of administration of the new drug,
(ii) the proposed dosage of the new drug,
(iii) the claims to be made for the new drug, and
(iv) the contra-indications and side effects of the new drug;
(l) a description of the pharmaceutical form in which it is proposed that the new drug will be sold;
(m) samples of the drug in the finished pharmaceutical form in which it is proposed that the new drug be sold; and
(n) such samples of the components of the drug as the Director may require."
5. C.08.004.(1) of the FDR states that "The Minister shall, after completing an examination of a new drug submission or supplement thereto,
(a) if that submission or supplement complies with the requirements of section C.08.002 or C.08.003., as the case may be, and section C.08.005.1, issue a notice of compliance; or
(b) if that submission or supplement does not comply with the requirements of section C.08.002 or C.08.003, as the case may be, or section C.08.005.1, notify the manufacturer that the submission or supplement does not so comply."
6. Subsection C.08.005.(1) of the FDR states that "Notwithstanding sections C.08.002 and C.08.003, a manufacturer of a new drug may sell the new drug to an investigator qualified to use it ... for use by the investigator solely for the purpose of clinical testing to obtain evidence with respect to the safety, dosage and effectiveness of that new drug ..."
7. Pursuant to subsection C.01.014.(1) of the FDR states that "No manufacturer shall sell a drug in dosage form unless a drug identification number has been assigned for that drug ..."
8. Subsection C.01.014.2(1) of the FDR states that "... where an application has provided all the information described in...section C.08.002 ... in respect of a drug, the Director shall issue to the applicant a document that (a) sets out (i) the identification number assigned for the drug, preceded by the letters "DIN" or "GP", as the case may be ..."
9. Pursuant to section C.08.004 of the FDR, an applicant is notified by means of a form entitled "Notice of Compliance" that the new drug complies with the requirements of section C.08.002 and C.08.005.1. At the same time and using the same form, the applicant is assigned an identification number for the drug preceded by the letters "DIN" (Drug Identification Number) or "GP" (General Purpose). The right to sell the drug is conferred by HC to the applicant at the time this identification number is assigned.
11. Where a new drug does not meet the requirements of the FDR, the applicant is notified of this by means of a "Notice of Non-Compliance". A drug identification number is not assigned where the new drug does not comply with the conditions set out in the FDR.
12. Paragraph 20(c) of the Excise Tax Act exempts "a supply of a licence, permit, quota or similar right (other than such a right supplied in respect of the importation of alcoholic beverages), and the supply of any service in respect of an application for such a right ..." made by a government.
13. It is proposed under section 4 of the Drug Submission Evaluation Service Fees Regulations that HC will charge a fee at the time the drug submission is filed with HC. Where a service is not performed in respect of a new drug submission filed pursuant to section C.08.002 of the FDR, the fee will be refunded in accordance with the Repayment of Receipts Regulations.
Ruling Requested
1. Is the processing of drug submission evaluations carried out by HC subject to GST?
Ruling Given
1. It is our opinion that the processing of drug submission evaluations carried out by XXXXX is a service in respect of an application for the right to sell a new drug. As the right to sell a new drug is exempt pursuant to paragraph 20(c) of Part VI of Schedule V to the Excise Tax Act, the service provided in processing an application for that right is exempt even where the right is denied.
This ruling is subject to the general limitations and qualifications outlined in GST Memorandum 100-3. We are bound by this ruling provided that none of the above issues are presently under audit, objection or appeal, there are no relevant changes in the future to the Excise Tax Act, and provided that you have fully described facts and transactions for which you requested a ruling. This ruling supersedes that which was provided to XXXXX of XXXXX on April 20, 1995 regarding this particular matter. A copy of this ruling has been provided to XXXXX for his information.
Should you have any questions in this regard, please call Marilyn Viger, Manager, Governmental Sectors/Federal Provincial Relations at 954-3551 or Lynn Renner, Policy Officer, at 952-9262. XXXXX Yours truly,
Director
Special Sectors
GST Rulings and Interpretations
| c.c.: |
Lynn F. Renner (Doc. 2406) XXXXX |
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