6 May 1999 GST/HST Ruling HQR0001664 - Application of the GST/HST to a Synthetic Blood Substitute

Dear XXXXX

This is in reply to your letter of February 25, 1999, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX for consideration.

Statement of Facts

Based on the information provided as well as discussions with representatives from the XXXXX our understanding of the facts is as follows:

1[.] XXXXX a drug product composed of XXXXX which is used in emergency situations to restore blood volume following serious blood loss where the required blood is not available. It is used in hospital intensive care units, operating rooms, and emergency rooms.

2. The therapeutic classification for XXXXX "plasma volume expander .XXXXX has advised that the product's label specifies that XXXXX is "an adjunct in the management of shock due to hemorrhage, surgery, sepsis, burns or other trauma. It is not a substitute for red blood cells or coagulation factors in plasma."

3. On XXXXX is classified as a "blood derivative" and is categorized as "ethical." XXXXX has advised that it does not have an official policy or guideline on the meaning of "ethical." The category "ethical" is assigned to those drugs that are not listed in any regulatory schedule, but have to be administered under the supervision of a health professional.

4. XXXXX has confirmed that XXXXX is not included in Schedule D of the Food and Drugs Act, nor is it included in any other schedule of that Act or of the Food and Drug Regulations. Although XXXXX as classified XXXXX as a blood derivative on its XXXXX for the purposes of Schedule D, does not consider XXXXX a blood derivative or a biological product but rather a synthetic product.

5[.] XXXXX is acquired for consideration by the XXXXX, a registered charity.

Ruling Requested

Is the consideration for a supply by sale of XXXXX zero-rated for the purposes of the GST/HST under paragraph 2(a) of Part I of Schedule VI to the Excise Tax Act (the "ETA")?

Ruling Given

Based on the facts set out above, we rule that the supply of XXXXX is not a zero-rated supply as described in paragraph 2(a) of Part I of Schedule VI to the ETA. As no other zero-rating provision applies, the supply of XXXXX for consideration is taxable for GST/HST purposes at the rate of 7%, or where the supply occurs in a participating province, 15%.

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.

Explanation

For the purposes of the GST/HST, when drugs are sold by a manufacturer or wholesaler, tax at the rate of 7% or 15% is applicable on the supply unless the drug is described in one of the zero-rating provisions of Part I of Schedule VI to the ETA. Blood and blood products are zero-rated pursuant to paragraph 2(a) of Part I of Schedule VI of the ETA as a result of being listed in Schedule D to the Food and Drugs Act. As XXXXX is not a blood product and it is not included in Schedule D to the Food and Drugs Act, the supply of XXXXX is not zero-rated under paragraph 2(a) of Part I of Schedule VI to the ETA.

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