8 November 2002 GST/HST Interpretation 37255 - Tax Status of In Vitro Diagnostic Test Kits Under the Excise Tax Act

Dear Sir:

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 supplies of in vitro diagnostic test kits purchased by medical testing laboratories.

We have considered your submission regarding the nature of automated testing equipment used in testing laboratories and the inclusion in a test kit of a reagent manufactured from a substance that is listed on Schedule C or D to the Food and Drugs Act (the "FDA"), as well as the arguments raised concerning the FDA.

During the course of our review of in vitro diagnostic test kits, we found that these test kits are an entirely new product that consists of reagents and articles intended to be used together to test bodily specimens in a laboratory. A composite product is distinguishable from its components. The tax status of a composite product is not governed by any one of its components and therefore in order for the supply to be zero-rated, the product must be included among the items listed, by name or description, in the schedules to the FDA and its regulations that are referenced in the zero-rating provisions of the Excise Tax Act (the "ETA").

We recognize that one of the components of a test kit may contain an ingredient that is a substance listed on a schedule to the FDA or its regulations. However, the composite products, that is, the test kits, are not themselves included in any schedule to the FDA or its regulations that are referenced in the zero-rating provisions of the ETA. In contrast, where a product is named or described in the zero-rating provisions of the ETA, the supply of this product would be zero-rated.

This letter affirms that the group of products under discussion referred to as in vitro diagnostic test kits are, and were, subject to the GST/HST at the rate of 7% or 15%. While there may have been divergent opinions in the past, our position on the tax status of the supply of these products was publicly confirmed in several letters that we issued on XXXXX. These letters superseded the letter of XXXXX, that you noted in your letter.

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