6 May 1999 GST/HST Ruling HQR0000824 - Application of the GST/HST to the Supply of Prosthesis

GST/HST Rulings and Interpretations Directorate Place Vanier, Tower C, 10th Floor 25 McArthur Avenue Vanier, ON K1A 0L5XXXXXAttention: XXXXX XXXXX

Case: HQR0000824XXXXXMay 6, 1999

Subject:

GST/HST APPLICATION RULING XXXXX

Dear: XXXXX

Thank you for your letter of August 28, 1997, with attachments, and your subsequent submission concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX XXXXX. Our understanding of the facts is as follows.

Statement of Facts

1. XXXXX is a GST registrant that markets the XXXXX XXXXX[.]

2. The XXXXX[.] It XXXXX[.]

3. The XXXXX used as part of a surgical treatment as either a long-term alternative or as an interim measure prior to heart transplantation by individuals with end-stage heart failure.

4. XXXXX, the individual wears an electronic controller and primary and supplementary battery packs. These are worn externally either on a belt around the waist, in a vest, or carried in a shoulder bag. XXXXX[.]

5. Currently, the XXXXX is used for up to two years, and is worn by the individual either:

a) in a hospital environment where it is monitored prior to heart transplant surgery;

b) at home while awaiting heart surgery; or

c) on a temporary basis but for a long period of time to allow the heart to improve thus eliminating the need for surgery, or on a permanent basis as a substitute for heart transplantation.

6. XXXXX sells various combinations of goods and services relating to the XXXXX XXXXX[.] These goods and services are assembled into packages, each of which are supplied for a single consideration:

a) The XXXXX XXXXX[.]

b) The XXXXX: This supply is comprised of start up equipment necessary for a hospital to begin the XXXXX program. The XXXXX monitors and associated equipment allow for the support of one XXXXX[.] The supply consists of:

XXXXX

XXXXX

•   1 Wearables Set (1),

The Set includes Support Clip (1); Shoulder Bags (2), Support Belts (2) Strain Reliefs (2)

•   2 Reserve Power Pack (2),

•   3 Primary Power Pack (3)

•   4 Power Pack Charger (2)

•   5 Power Pack Tester (1)

•   6 Compact Controller (2)

•   7 Implant Backup Kit XXXXX (1).

Also included with the purchase of this package is a training/education/service kit known as the XXXXX which includes the following elements:

•   8 Operator training course;

•   9 Surgical Lab Training Course;

•   10 Equipment Installation;

•   1[1] XXXXX

•   12 Use of Surgical Training Implantable Kit and Use of Anatomical Model;

•   13 Training and reference Manuals;

•   14 Operators Manual;

•   15 User's Guide;

•   16 Data Collection Notebook; and

•   17 Service for one year which includes technical/clinical support and electronic equipment parts and labour.

a) Personal Support Capability: For use outside of a hospital or in a hospital when the patient's hemodynamic condition has stabilized. This package includes:

•   1 Personal Monitor (2),

•   2 Standby Power Supply (1);

•   3 Primary Power Pack (3);

•   4 Reserve Power Pack (2);

•   5 Power Pack Charger (2);

•   6 Compact Controller (2).

b) Extra Recipient In-Hospital Capability: This supply allows for the support of an additional XXXX[.] It includes:

•   [1] XXXXX monitor and Cart (1);

•   2 Reserve Power Pack (2);

•   3 Primary Power Pack (3);

•   4 Power Pack Charger (1); and

•   5 Compact Controller (2).

Rulings Requested

1. The XXXXX is a zero-rated prosthesis pursuant section 25 of Part II of Schedule VI to the Excise Tax Act.

2. The supplies listed in paragraphs b) to d) in Fact #6 above are zero-rated as specially designed parts, accessories, or attachments for a prosthesis pursuant to section 32 of Part II of Schedule VI.

3. The supply of the "XXXXX" is considered part of a single supply of the XXXXX[.]

Rulings Given

Based on the facts set out above, it is the Department's ruling that:

1. The supply of the XXXXX is not zero-rated under section 25 of Part II of Schedule VI.

2. The associated supplies listed in Fact #6 are not zero-rated under section 32 of Part II of Schedule VI as specially designed parts, accessories, or attachments for a property described in Part II.

3. The supply of the "XXXXX" is a constituent part of a single supply of the XXXXX[.] Please note that the Department would regard all the goods and services provided in one of the packages listed in Fact #6 as elements of a single supply of the XXXXX XXXXX[.] As there is no zero-rating provision in Part II of Schedule VI that applies to this supply, the XXXXX XXXXX and its constituent elements are taxable at the rate of 7%.

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%. Goods that are delivered or made available in a participating province are subject to the HST. To the extent that they are taxable supplies (which are not zero-rated), tax must be collected at the harmonized rate

These rulings are 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 these rulings 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 transactions for which you requested a ruling.

Explanation

The Department considers a surgical prosthesis, in the context of section 25 of Part II of Schedule VI, XXXXX that is a permanent artificial substitute for a missing part of the body. Items which assist or accompany a body part are not prosthetic devices.

Although elements of the XXXXX, the device does not replace a missing body part; rather it is designed to be worn temporarily to assist the performance of the heart. Consequently, the XXXXX XXXXX is not a prosthesis for the purposes of section 25. Since the XXXXX XXXXX is not a zero-rated medical device described in Part II of Schedule VI, the associated parts, accessories, attachments, and services supplied with the XXXXX are not zero-rated under section 32 of that Part.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 942-6761.

Yours truly,

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

c.c.:

P. Bertrand O. Newell S. Eastman

Legislative References:	section 25 of Part II of Schedule VI
NCS Subject Code(s):	R-11860-2