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Subject:
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GST INTERPRETATION
"institutional health care service"
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Dear XXXXX
Thank you for your facsimile of January 30, 1996 requesting an interpretation with respect to the definition of "institutional health care service" and the application of the Goods and Services Tax (GST) to your client's operations. Further to your telephone conversation with Mr. Dixon on February 8, 1996, you explained that your use of the term "other health care services" was with respect to services provided to patients in hospitals and other health care facilities by health care aids and health care assistants employed by your client. I apologize for the delay in responding.
Our understanding of the relevant facts is as follows:
1. A for profit entity under a contractual arrangement with hospitals or other health care facilities supplies various nursing and personal care services to the facilities.
2. Some of your client's staff are registered nurses, registered nursing assistants and licensed practical nurses.
3. Other of your client's staff are health care aids and health care assistants.
With respect to services provided by employees of your client's to hospitals and other health care facilities, the following is provided for your information:
A variety of health care services are provided by specific health care professionals and these services are exempt of the GST pursuant to sections 5, 6, 7, 8, 10, and 12 of Part II of Schedule V to the Excise Tax Act (ETA). These services must be provided by health care professionals who are entitled to provide the health care services identified as tax-exempt supplies.
Hospitals and other health care facilities provide exempt health care services including "institutional health care service" pursuant to section 2 of Part II of Schedule V which exempts the following:
"A supply of an institutional health care service made by the operator of the health care facility to a patient or resident of the facility, but not including a service related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for reconstructive purposes."
The term "institutional health care service" is defined under section 1 of the same Part as follows:
"...means any of the following when provided in a health care facility:
(a) laboratory, radiological or other diagnostic services,
(b) drugs, biologicals or related preparations when administered,
or a medical prosthesis when installed, in the facility in conjunction with the supply of a service included in any of paragraphs (a) and (c) to (g),
(c) the use of operating rooms, case rooms or anaesthetic facilities, including necessary equipment or supplies,
(d) medical or surgical equipment or supplies
([i]) used by the operator of the facility in providing a service included in paragraphs (a) to (c) and (e) to (g), or
([ii]) supplied to a patient or resident of the facilityotherwise than by way of sale,
(e) the use of radiotherapy, physiotherapy or occupational therapy facilities,
(f) accommodation,
(g) meals (other than meals served in a restaurant, cafeteria or similar eating establishment), and
(h) services rendered by persons who receive remuneration therefor from the operator of the facility;"
A health care facility is defined, in part, as follows:
"(a) a facility, or part thereof, operated for the purpose of providing medical or hospital care, including acute, rehabilitative or chronic care ..."
The policy regarding the application of the GST to health care personnel under contract to a "health care facility" has been reviewed and the following revised interpretation is provided based on the ETA.
Based on the information provided, the hospitals and other health care facilities described (e.g. nursing homes) meet the definition of a "health care facility" pursuant to section 1 of Part II of Schedule V to the ETA. Consequently, any "institutional health care service" provided to patients or residents by the operator of the health care facility is exempt of the GST pursuant to section 2 of Part II of Schedule V to the ETA.
The supply of a nursing service rendered to an individual in a health care facility or in an individual's place of residence by a registered nurse, a registered nursing assistant (now recognized as a registered practical nurse by the XXXXX or a licensed practical nurse is exempt of the GST pursuant to section 6 of Part II of the ETA. Consequently, a supply of a nursing service provide by a registered nurse, a registered nursing assistant or a licensed practical nurses employed by your client, which is rendered to an individual in a hospital or health care facility meet the exempting provision quoted above and these services will not incur the GST.
Pursuant to section 2 of Part II of Schedule V to the ETA, the supply of an "institutional health care service" must be made by the operator of the hospital or health care facility to a patient or resident of the facility. Your client makes a supply of personal care services performed by health care aids and health care assistants to the hospital or other health care facility and invoices the institution for such services. This supply of contracted personal care services is taxable at the rate of 7%. Subsequently, the operator of the hospital or other health care facility makes a supply of these services which are provided by health care aids and health care assistants to patients or residents of the institution. The supply of these services by the operator of the health care facility to a patient or resident of the facility is exempt of the GST.
If a business only conducts exempt GST activities, it is not permitted to become a GST registrant. An unregistered business is not entitled to claim through any credit or refund mechanism the GST paid on its expenses. However, we are of the opinion that, for purposes of the ETA, your client is involved in making two separate supplies to the hospital or other health care facility, one is a taxable supply of personal care service and the other is an exempt supply of nursing service. Accordingly, your client should register and once registered is entitled to claim input tax credits in respect of the GST paid on purchases which will be used in a commercial activity, which by definition excludes the making of exempt supplies.
This change applies to supplies of contracted health care services (i.e., those which are not provided for in the ETA) to health care facilities made after 1995. Effective January 1, 1996 the supply of such contracted services will be taxable at the rate of 7%.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to out interpretation. These comments are not rulings and, in accordance with the guidelines set out in GST Memoranda Series Section 1.4, do not bind the Department with respect to a particular situation.
Please ensure that your client is made aware of this revision in policy.
If you have any questions or require any further clarification regarding this matter please contact me at (613) 954-7656 or Mr. Lance Dixon at (613) 952-9264.
Yours truly,
J.A .Venne
Director
Special Sectors
GST Ruling and Interpretations
Policy and Legislation
c.c.: E. Vermes
XXXXX
File # 11865-4(lgd)
C.N.: 2998
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