28 November 2002 GST/HST Interpretation 38236 - Application of the Excise Tax Act to Test Kits

Dear XXXXX:

This is in reply to your letter of XXXXX with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a category of products referred to as "test kits" purchased by medical laboratories and public hospitals that are for in vivo (in the living body) use in the treatment of diseases and illnesses.

We apologize for the delay in responding to your request. As you are aware, we undertook an extensive review of the application of the GST/HST to in vitro diagnostic products that considered the legislative and policy issues related to these products. As we have recently completed our review, we are now able to address your request.

We understand that the kits under discussion contain different types of drug products for human use in the treatment of various diseases, illnesses, etc. The kits represent a final drug product that is comprised of two or more drug products, or a combination of one or more drug products and non-drug products. You indicated in your submission that one or more of the components or drug products included in the kit may fall under a category included in Schedule D to the Food and Drugs Act (the "FDA").

For our consideration, you included with your submission information concerning two products, the "XXXXX" and the "XXXXX". These kits are representative of the type of products under discussion. You suggested that the supply of these kit products would qualify as a zero-rated supply of a drug under paragraph 2(a) of Part I of Schedule VI to the Excise Tax Act (the "ETA") on the basis that one of the product's components falls under a category included in Schedule D to the FDA.

In view of our approach concerning the tax status of in vitro diagnostic products under the ETA, i.e., that the issue for paragraph 2(a) of Part I of Schedule VI is whether the product in question is included in Schedule C or D to the FDA, and not whether an ingredient or component of the product is included in Schedule C or D to the FDA, you are requesting confirmation of the Canada Customs and Revenue Agency's interpretation of the tax status of kit products provided for in vivo use.

Our approach concerning in vitro diagnostic products does bring into question the current position of how the GST/HST applies to composite products such as the in vivo kit products you described, and our approach may impact the way the tax has been applied to these products. We have identified this as an issue to follow-up, and we will be undertaking a review of the application of the GST/HST to these products. We will apprise you, as well as the health care sector and the pharmaceutical industry, of the results of our review.

Should you have any further questions or require clarification on the above or any other GST/HST 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