28 August 1998 GST/HST Ruling HQR0001182 - GST/HST Status of the Supply of Certain Magnifiers

                                                                        GST/HST Rulings and Interpretations
  Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, ON K1A 0L5

                                                                        XXXXX
XXXXX                                                                                 Case: HQR0001182

Dear XXXXX

Thank you for your letter of May 12, 1998, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below:

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

1. Your client imports and supplies in Canada certain magnifiers for use by persons with low vision who are categorized as legally blind. You attached the 1997 catalogue from XXXXX for our review.

Ruling Requested

1. You would like to confirm the application of the GST/HST to the supply of the magnifiers described in the XXXXX catalogue.

Ruling Given

Section 30 of Part II of Schedule VI provides a zero-rated status for the following supplies:

"A supply of an article that is specially designed for the use of blind individuals when the article is supplied for use by a blind individual to or by the Canadian National Institute for the Blind or any other bona fide institution or association for blind individuals or on the order or certificate of a medical practitioner."

Specially Designed Criteria

For the purposes of section 30, the Department considers "blind individuals" to be individuals with visual acuity of 20/200 or 20 degrees or less visual field in both eyes. Persons with this condition are often referred to as "legally blind" individuals or as individuals with 10% vision or less. Individuals whose vision can be corrected by eyeglasses or contact lenses to exceed these criteria are not considered to be legally blind.

We consider that the word "designed" relates to the deliberate intention of the original designer or manufacturer as to the ultimate use of the goods as reflected in the qualities and features of the goods themselves. Articles are specially designed if they are designed for a single particular application, object or intention. A specially designed article in the context of section 30 has design features which make it particularly suitable for persons who are blind to use the device, or at least make it easier to use the device. Such an article satisfies the needs or wants of a blind individual. The specially designed features must be significant in that the features make the article recognizably different from similar goods without the features. General purpose items do not satisfy this requirement.

Goods which are specially designed for use by a blind individual may contain other design elements allowing them to be used by persons who are not blind provided that the additional design elements do not make the good less useful for persons who are blind. If the design elements allowing the alternative uses make the goods less suitable for persons who are blind then we would not consider these multi-purpose goods to be specially designed for use by blind individuals.

Where a magnifying device has a power of magnification of 4X or greater it is accepted by Revenue Canada to be of a power of magnification which is generally required by a legally blind individual. However, the magnification is only one feature which must be met under section 30. The general design of the good must include features which satisfy a particular need of blind individuals.

For example, a general telescope with a power of 4X magnification or greater can be used by sighted individuals for other purposes. Therefore, traditional telescopes by design do not qualify for a zero-rated status under section 30. On the other hand, magnifiers which are not telescopes may qualify as a specially designed article for use by a blind individual where the power of magnification is 4X or greater if, along with the 4X magnification, the product incorporates special features which are specifically directed towards facilitating use by blind individuals.

Although many of the goods in the catalogue have a 4X power of magnification or greater, only some of the goods appear to incorporate special design features for blind individuals. The most common qualifying feature is a contrasting-coloured power button which can be seen more readily by legally blind individuals.

In the XXXXX catalogue, the goods which satisfy the specially designed criteria are:

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

The remaining magnifiers are not of a high enough power of magnification or do not incorporate any special design features which would support the position that the goods are specially designed for use by a blind individual. Therefore the supply of those goods do not qualify under section 30 for a zero-rated GST/HST status.

When the products listed above are supplied to the CNIB or any other bona fide institution or association for blind individuals, by your client, the supply is zero-rated. Importations or purchases in Canada of these products by your client are subject to the GST/HST at their respective rates regardless of whether the supply is destined for sale to the CNIB or not.

Please note that design changes to any of the above models may result in a change in the GST/HST status of the supply of any of the above-noted optical products.

Linen Testers

Subsequently, you submitted documentation which stated the position that certain models of linen testers designed without scales or rulers incorporated into their design meet the specially-designed criteria and that the supply of those linen testers should be zero-rated. The lack of built-in measuring devices is not considered to be a feature which satisfies the specially designed criterion under section 30 quoted above. Therefore the supply of all linen testers is subject to the GST/HST.

Parts, Accessories and Attachments

Parts, accessories and attachments such as the illuminated handles, bulbs, draw-string pouches do not qualify for GST/HST relief when sold to or by the CNIB or other bona fide institution for the blind because they do not meet the requirements of section 32 of Part II of Schedule VI to the ETA as they can be used with magnifiers of various levels of power, not just the magnifiers which qualify for relief. However, if a qualifying magnifier and illuminated handle are sold together as a single unit for one consideration, the supply would be zero-rated under section 30 quoted above.

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.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Your sample of a magnifying device which you supplied for our examination will be returned under separate cover. 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 Unit
PSBs and Governments Division
GST/HST Rulings and Interpretations Directorate