File: 11860-3
Dear XXXXX:
This is further to your discussion of January 19, 1996 with Ken Syer of this office and subsequent fax transmission of the same date regarding the application of the Goods and Services Tax (GST) to the supply of dialysis solutions under home care programs operated by hospitals. Your firm has previously received a ruling on this matter dated October 9, 1991 from our XXXXX District Office.
Statement of Facts
The facts of your case are understood to be as follows:
1. XXXXX supplies dialysis solutions. Dialysis solutions are not listed under any of the Schedules to the Food and Drugs Act or its Regulations which are included under section 2 of Part I of Schedule VI to the Excise Tax Act (ETA). The supply of drugs under section 2 are unconditionally zero-rated. Supplies of dialysis solutions may, however, be zero-rated when supplied under the conditions described in section 3 of Part I of Schedule VI.
2[.] XXXXX delivers dialysis solutions directly to patients at their residences under a home care program operated by a hospital. It is understood that all supplies are under the prescription of a practitioner as defined under section 1 of Part I of Schedule VI to the ETA.
3[.] When making supplies of dialysis solution under a home care program, XXXXX is verbally notified by a hospital to "register" a patient in the hospital's home care program. XXXXX does not receive written prescriptions nor is XXXXX in contact with the practitioner. It is understood that there is a prescription but XXXXX rarely sees one. Based upon this verbal notification XXXXX then ships the dialysis solution to the patient's home on a regular basis.
4. At no time does XXXXX employ a pharmacist in the process.
Ruling Requested
You have requested confirmation of the GST treatment of supplies of dialysis solution when supplied to hospitals under home care programs as described above.
Ruling Given
Supplies to hospitals and other health care facilities of dialysis solution which are delivered to a patient home under a home care program are taxable at 7%.
Explanation
Section 3 of Part I of Schedule VI to the Excise Tax Act (ETA) provides a zero-rated GST status for supplies of the following:
"A supply of a drug when the drug is for human use and is dispensed
(a) by a practitioner to an individual for the personal consumption or use of the individual or an individual related thereto; or
(b) on the prescription of a practitioner for the personal consumption or use of the individual named in the prescription."
The term "prescription" is defined for the purposes of Part I of Schedule VI to the ETA as follows:
"prescription" means a written or verbal order, given to a pharmacist by a practitioner, directing that a stated amount of any drug or mixture of drugs specified in the order be dispensed for the individual named in the order.
Please note that the Federal Government tabled a Notice of Ways and Means in the House of Commons on April 23, 1996, which includes proposed amendments to the ETA that include the two provisions quoted above. The proposed amendments to these two provisions are not substantial. They are a result of the proposed repeal of the term "practitioner" and its replacement with the term "medical practitioner" under section 1 of Part I of Schedule VI. The term "practitioner" in the above quoted provisions is to be replaced by the term "medical practitioner" which retains the same definition as the previous term.
As per the definition of "prescription" quoted above, prescriptions must be presented to a pharmacist who would then dispense the drug as per the written or verbal order. As noted above, at no time does a pharmacist receive a prescription as per the definition of "prescription" above. Therefore the requirements to zero-rate the supply under section 3 have not been met.
It is our position that section 3 was not intended as a zero-rating provision for the supply of drugs to a hospital under a home care program. Section 3 was designed to provide a zero-rated status for the supply of drugs to consumers when supplied to the consumer by a practitioner or pharmacist. Supplies to hospitals and other health care facilities of drugs (other than the unconditionally zero-rated drugs under section 2 of Part I of Schedule VI) remain properly taxable at 7%.
As you are aware, hospital authorities including certified public hospitals are entitled to a rebate of 83% of the GST paid on taxable purchases. Any GST paid by your clients is eligible for that rebate if the hospital authority files a claim with the Department within the statutory time limits.
This confirms the ruling which your firm received on October 9, 1991. This ruling is given subject to the general limitations and qualifications outlined in the GST Memoranda Series 1.4. 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 described all necessary facts and transactions for which you requested a ruling.
If you would like to discuss this matter further, please do not hesitate to contact Ken Syer, A/Senior Policy Officer, at (613) 952-9590.
Yours truly,
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
c.c.: M. Brulé
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