10 March 1999 GST/HST Ruling HQR0001576 - Application of the GST/HST to the Supply of Medical Devices

Dear XXXXX

Thank you for your letter of February 3, 1999, with attachments and video, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies of the XXXXX[.]

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX are medical devices developed to establish and maintain vascular access in individuals undergoing dialysis treatments. These devices are surgically implanted, and are used by the patient instead of a catheter.

2. The XXXXX consists of a valve connected to a cannula. The valve is implanted under the skin, usually in the right side chest area. The cannula is typically implanted in the internal jugular vein. The valve is accessed using standard fistula needles. Testing has found that the device could last the equivalent of 40 years of hemodialysis needle insertions.

3. The XXXXX consists of a valve and cannula. This device is implanted under the skin surface and the cannula passes through the peritoneal membrane.

Ruling Requested

Are supplies of the XXXXX considered supplies of zero-rated medical devices pursuant to section 25 of Part II of Schedule VI to the Excise Tax Act?

Ruling Given

Based on the facts set out above, we rule that supplies of the XXXXX XXXXX are not zero-rated medical devices as described in section 25 of Part II of Schedule VI and are therefore taxable at the rate of 7%.

On April 1, 1997, the harmonized sales tax replaced the goods and services tax and the provincial sales tax 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, and services performed in a participating province, 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 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, to be a device 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 the XXXXX are surgically implanted, these devices do not replace a missing body part; rather they are designed to provide an access port for individuals undergoing dialysis treatments. Consequently, as these devices are not prosthetics, they are not zero-rated under section 25 of Part II of Schedule VI. As there is no other zero-rating provision that applies, these supplies are subject to tax at the rate of 7% or if applicable, 15%. Hospitals that purchase these devices are entitled to a rebate of 83% of the tax paid.

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