20 November 1998 GST/HST Interpretation HQR0001322 - Supply of Blood and Blood Derivatives By a Charity

Dear Ms. XXXXX

This is in response to your letter of September 1, 1998 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of blood and blood derivatives by a charity. All legislative references are to the Excise Tax Act (the Act) and Regulations thereunder, unless otherwise specified. This letter does not reflect any legislative provisions regarding the provincial component of the HST.

You would like to confirm the Revenue Canada position on the interaction between sections 5 and 5.1 of Part V.1 of Schedule V to the Excise Tax Act when the supply in question is one of blood or blood derivatives.

The supply of blood or blood derivatives is zero-rated under Part I of Schedule VI including supplies made for no consideration. These items are zero-rated pursuant to paragraph 2(a) of that Part since blood and blood derivatives are included in Schedule D of the Food and Drugs Act.

The exclusion under section 5 of Part V.1 of Schedule V for supplies of blood and blood derivatives means this provision does not effect the zero-rated status.

The section 5.1 "direct cost exemption" is not applicable in the case of all supplies (including supplies of blood and blood derivatives) when made for no consideration. Our position is based on the use of the term "usual charge" in section 5.1. For purposes of section 5.1, where there is no consideration there is no "usual charge" since, in our view, a "usual charge" must be an amount greater than nil. For purposes of section 5.1 a "usual charge" does not include "no charge" or "nil charge" situations.

This results in the direct cost exemption not applying where there is no consideration for the supply. The end result is neither sections 5 or 5.1 effect the zero-rated status for blood and blood derivatives. This is understood to be the result intended by the Department of Finance.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9590.

Yours truly,

Ken Syer
Senior Rulings Officer
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate