File: 11860-2
C.N.: 1557
|
Subject:
|
GST and the Supply of Prescription Eyewear
|
This is in response to your letter of December 22, 1995, in which you requested confirmation of the application of the GST to supplies of prescription eyewear where a third party pays the supplier for the eyewear. You also asked for clarification on the application of the GST to repairs made to prescription eyewear.
Third Party Billings
As you are aware, effective January 1, 1993, the French version of section 9 of Part II of Schedule VI was amended to match the English. The effect of this change was to limit the conditions under this provision under which supplies of prescription eyewear could be zero-rated. One of the conditions is that the supply must be made to a consumer. The term consumer is defined, in the ETA , in part, as an individual. The term "individual" is defined as "a natural person". "Recipient" as defined in the ETA is the person who pays or agrees to pay for a supply. An insurance company therefore cannot meet the definition of a consumer. Where an insurance company pays the supplier for the supply of prescription eyewear the company becomes the recipient under the ETA and the supply is subject to the GST at 7%.
This is also the case where the consumer is a welfare recipient and the supplier of prescription eyewear is paid by a welfare program. The welfare agency is the recipient and the supply is subject to the GST at 7%.
Repairs to Prescription Eyewear
Section 34 of Part II of Schedule VI to the ETA provides a zero-rated GST status for, in part, the supply of the service of repairing, restoring or modifying a property zero-rated under Part II of Schedule VI. Under this section parts which are provided in conjunction with the service are also zero-rated. These parts need not be specially designed. Multi-use parts are zero-rated as well.
Administrative concerns arise where prescription glasses are repaired. The repair parts and services for prescription glasses may also be used in repairing non-prescription eyewear. Further, repairs may be performed by persons who may or may not have supplied the original prescription glasses. This creates a verification issue: How to verify that the parts were used and the services were performed on prescription eyewear? There is no definitive proof that the parts and service related to the prescription eyewear.
In terms of documentary evidence, it is our opinion that invoices should state that the repairs were made for either prescription eyewear or non-prescription eyewear. However, where the invoice is silent, there should be a general presumption in favour of prescription eyewear unless there is other evidence which contradicts this presumption. Notwithstanding the above comments, the type of evidence which is suitable to satisfy whether the repairs were properly zero-rated or otherwise, is a matter to be determined by Audit not by GST Rulings and Interpretations.
If you would like to discuss this matter further, please contact Ken Syer, A/Senior Policy Officer at (613) 952-9590.
J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
c.c.: E. Vermes
c.c.: J.A. Venne
Email this Content