8 September 1999 GST/HST Interpretation HQR0001931 - Supplies of Diagnostic Kits Containing

Dear Sir:

This is in reply to your letter of August 16, 1999 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of diagnostic kits made by your client to medical laboratories and hospitals for blood testing and other diagnostic purposes.

It is our understanding that these diagnostic kits may contain substances included in XXXXX as well as other reagents and accessories. The diagnostic kits are sold and invoiced as a single supply. The position taken by XXXXX that if a substance listed on XXXXX is included in a kit which carries a claim or is sold or advertised for the diagnosis of a disease or disorder in humans or animals, the kit is considered to be a XXXXX[.]

Interpretation Requested

The supply of a diagnostic kit which contains a substance included in XXXXX will qualify for zero-rated status pursuant to paragraph 2(a) of Part I of Schedule VI to the Excise Tax Act.

Interpretation Given

Under paragraph 2(a) of Part I of Schedule VI to the Excise Tax Act, the supply of a drug included in XXXXX is a zero-rated supply except where the drug is labelled or supplied solely for agricultural or veterinary use. The interpretation of whether a product is a "drug" and whether it is included in XXXXX. Revenue Canada will adopt that interpretation when determining whether a product is zero-rated pursuant to paragraph 2(a) of Part II of Schedule VI to the Excise Tax Act.

Consequently, where a diagnostic kit is considered to be XXXXX, the supply of that kit will qualify for zero-rated status under the provisions of paragraph 2(a) of Part II of Schedule VI to the Excise Tax Act.

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) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division