R. Smith
GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Avenue
Vanier, Ontario
XXXXX K1A 0L5
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XXXXX
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Case: 00000617
XXXXX Business Number: NA
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XXXXX
Dear XXXXX
Thank you for your letter of November 5, 1997 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of goods and services made by a Hospital ("Hospital") and Physicians ("Physicians") to a Research Institute ("Institute").
Interpretation Requested
What are the GST/HST consequences to the following:
• Supplies of property and services by the Hospital to the Institute;
• The ability of the Hospital to claim an 83 percent rebate on taxable supplies, (including research services) which are supplied to the Institute at direct cost, and .
• The requirement for the Physicians to register for the GST/HST.
Statement of Facts
For Income Tax Purposes, a Hospital ("Hospital") is a registered charity. For GST/HST purposes, the Hospital meets the definition of a public sector body, public service body, a public institution and has been designated a "hospital authority".
A Research Institute ("Institute") has "approved" research institute status under subsection 37(1) of the Income Tax Act (ITA). The institute is a charity within the meaning assigned under the ITA. As such, it would be treated as a charity for GST/HST purposes.
The Hospital leases real and capital property (i.e., equipment) to the Institute for periods longer than one month and the property was not last used in commercial activities.
Physicians ("Physicians") will provide research services as independent researchers to the Institute. The consideration for such research services in some cases will exceed $30,000.00 per annum.
Interpretation Given
Based on the information provided.
A supply by way of lease of real property for a period of one month or more when made by a hospital authority will be exempt of the GST/HST by reason of section 25 of Part VI of Schedule V to the Excise Tax Act (ETA) unless the supply is excluded from exemption by any of the paragraphs (a) to (i) of section 25. For example, a long term lease of real property will be excluded from exemptions under section 25 by reason of paragraph 25(g) if an election under section 211 of the Act is in effect with respect to the property.
Supplies of personal property and of services made by a public institution will be exempt under section 2 of Part VI of Schedule V to the ETA unless the supply is excluded from exemption by any of the paragraphs (a) to (m) of section 2. For example. a supply of tangible personal property that was acquired for the purpose of making a supply of the property and was neither donated to the public institution nor used by another person prior to its acquisition by the institution would be excluded from exemption under section 2 by reason of paragraph 2(e).
A hospital authority that is also a charity can only claim a rebate of 83 percent rate available to hospital authorities to the extent that its inputs are for consumption, use or supply in the course of operating a public hospital. To the extent that its claim relates to inputs that are not for consumption, use or supply in the course of operating a public hospital, the hospital authority can only claim a rebate at the 50 percent rate applicable to charities. The extent to which a particular good or service relates to consumption, use or supply in the course of operating a public hospital is a question of fact.
Based on the limited information provided, it appears the Physicians are engaged in regular and continuous research activities, On this basis, we confirm that the Physicians are engaged in a commercial activity and may register for the GST/HST.
Where a person is registered for purposes of the Act, subsection 169(1) provides that a person is entitled to claim full input tax credits (ITC's) for all GST/HST paid or payable on inputs acquired exclusively for consumption, use or supply in the provision of their taxable goods and services. A commercial activity does not include providing exempt goods and services. It is a question of fact whether the physicians are providing taxable or exempt supplies and whether they would have to prorate the expenses between taxable and exempt activities. ITC's are claimed on the GST/HST returns during the reporting period assigned to the registrant.
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 at 15 percent. Goods or services that are delivered or made available in a participating province are subject to the HST unless exempted or zero-rated by a provision of the ETA.
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 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 the undersigned at (613) 952-9264 or Ms Enikö Vermes, Manager, Municipalities and Health Care Services, at 954-5127.
Yours truly,
Lance G. Dixon, MHA, CHE
Municipalities & Health Care Services Unit
Public Service Bodies & Governments Division
GST/HST Rulings and Interpretations Directorate
| c.c.: |
Lorrie Grannary
Michael Warren
Lance Dixon
Enikö Vermes
Neil Minken |
Encl.: Nil
Legislative References: Section 25 of Part VI of Schedule V to the ETA
Subsections 259(1), 259(4) and 259(4.1) of the ETA, Section 5 and 10 of part II of Schedule V to the ETA
NCS Subject Code(s): 11865-1, 11865-3, 11880-7, 11825-1
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