9 November 1998 GST/HST Interpretation HQR0001207 - Application of the GST/HST to

Dear XXXXX

Thank you for your letter of May 29, 1998 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to laboratory testing of medical samples performed by a for profit laboratory. The laboratory diagnostic testing is similar to that carried out in health care facilities (i.e., hospital diagnostic laboratories).

Interpretation Requested

The testing carried out by a for profit diagnostic laboratory on the order of a Chief Medical officer (CMO) is exempt of the GST/HST pursuant to section 10 of Part II of Schedule V to the Excise Tax Act (ETA).

Interpretation Given

Based on the information provided, laboratory diagnostic testing carried out by a for profit laboratory on the order of a medical practitioner or practitioner is exempt of the GST/HST.

As requested by you in our telephone conversation of October 9, 1998, the following is provided for your information. Section 10 of Part II of Schedule V to the ETA exempts the supply of a prescribed diagnostic, treatment or other health care service, when made on the order of a medical practitioner or practitioner. For purposes of the ETA the word prescribed means prescribed by regulation or determined in accordance with rules prescribed by regulation. The Health Care Services (GST) Regulations have prescribed laboratory, radiological and other diagnostic services generally available in a health care facility. Consequently, if a physician or practitioners order these diagnostic services, the consideration charged for the testing procedures is exempt of the GST/HST pursuant to section 10 of Part II of Schedule V to the ETA.

For example, if the CMO of a Life Insurance company orders a laboratory, radiological or other diagnostic test for an individual, the consideration for the supply of this service is exempt whether billed to the individual patient, insurance company or other entity. It is important to note the exempting provisions apply to the laboratory, radiological and other diagnostic services (e.g. cholesterol, LAPA chest x-ray or sonography), not the ordering of the diagnostic test.

Registered nurses or other health care professionals operating as independent agents (i.e., under contractual agreements with insurance underwriting companies or other entities) do not perform any laboratory, radiological or other diagnostic services. They obtain samples of body fluids and transport these samples to licensed testing facilities, who in turn perform the diagnostic testing.

In summary

Paramedical services carried out by nurses operating as independent agents (i.e., under contractual agreements with insurance underwriting companies or other entities) are subject to the GST/HST.

Paramedical services carried out by other health care professionals such as phlebotomists or laboratory technologists operating as independent agents (i.e., under contractual agreements with insurance underwriting companies or other entities) are subject to the GST/HST.

Laboratory, radiological or other diagnostic services generally available in a health care facility are exempt pursuant to section 10 of Part II of Schedule V to the Act when made on the written order of a medical practitioner or practitioner. For purposes of the Act a registered nurse does not meet the definition of either a medical practitioner or practitioner.

In view of the apparent confusion in the industry regarding the tax status of paramedical services and in the interest of fairness and national consistency, the department has implemented the following policy:

Prior to April 1, 1998, all paramedical services will be treated as tax exempt supplies. Effective April 1, 1998, charges made for paramedical services as described above, will be taxable at either 7 or 15 per cent for GST/HST purposes.

Notwithstanding the above policy, registrants have the option of treating their supplies of paramedical services as taxable services for prior years. If the registrant chooses this option, they are required to remit the applicable GST/HST and they are entitled to claim an input tax credit for GST/HST paid on related purchases.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%., to the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Department with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9264.

Yours truly,

Lance G. Dixon, MHA., CHE
Municipalities & Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate