12 June 2000 GST/HST Interpretation 31023 - GST Issues for Orthodontic Parts

XXXXX

Dear XXXXX:

Thank you for your letter of May 1, 2000 concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the operations of your client.

Interpretation Requested

Are orthodontic products (orthodontic braces, parts and accessories) imported into Canada taxable?

XXXXX

Interpretation Given

The supply of orthodontic products is subject to the 7% GST or the 15% HST in the participating provinces of Newfoundland, New Brunswick, and Nova Scotia, at the time of their importation or supply in Canada.

Section 11.1 of Part II of Schedule VI to the Excise Tax Act (the "ETA") provides zero-rated status to the supply of an orthodontic appliance. Section 32 of Part II of Schedule VI to the ETA provides zero-rated status to the supply of any part, attachment, or accessory that is specially designed for a zero-rated item listed in Part II of Schedule VI.

Given the vast number of parts used to fabricate an orthodontic appliance and the difficulty in identifying those parts that are specially designed for orthodontic appliances, CCRA has worked XXXXX to resolve the issue by adopting the following position:

(a) all parts for orthodontic appliances imported into or purchased in Canada prior to their actual use will be treated as being subject to 7% GST or 15% HST; and

b) qualifying registered dentists, orthodontists, and dental suppliers acquiring the above parts either for resale or for use as parts in a zero-rated orthodontic appliance can recover the tax paid by claiming input tax credits where they meet the requirements for claiming input tax credits, such as documentary requirements.

With this position, we have greatly simplified the administration of the GST/HST XXXXX. Please note that specially designed parts do not include parts with alternative uses (unless the only alternative use is also as a specially designed part for another zero-rated medical device). Further, specially designed parts do not include goods which require further manufacture before being used in or incorporated into the orthodontic appliance, nor do they include materials such as powders and pastes. Materials which are used to make parts are not parts for the purposes of section 32 of Part II of Schedule VI to 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/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency 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) 952-9592.

Yours truly,

Michel Guay
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate