GST/HST Policy Statement P-207

Date of Issue

December 13, 1996

Subject

The GST status of the supply of a laser eye surgery service.

Legislative Reference(s)

Subsection 123(1) of the Excise Tax Act ( the “ Act” ) - definition of "exempt supply"
Section 1 of Part II of Schedule V to the Act - definitions of “health care facility”, “institutional health care service” and “medical practitioner"
Section 2 of Part II of Schedule V to the Act
Section 5 of Part II of Schedule V to the Act

National Coding System File Number(s)

11865-3

11865-17

Effective Date

January 1, 1991. Where the Department has issued rulings and/or interpretations that contradict this policy, this policy should be applied to the affected person(s) from the earlier of the day that the Department publishes the policy or the person is informed of the application of the tax to their situation.

Patients who have paid GST after June 30, 1996 on the consideration for laser eye surgery services may file a rebate application with the Department within two years after the amount is paid.

Patients who have paid GST before July 1, 1996 on the consideration for laser eye surgery services may file a rebate application with the Department within four years after the amount is paid if the rebate application is filed before July 1, 1998.

Rebate applications filed after June 30, 1998 only cover those amounts paid within two years of the date of the rebate application.

Suppliers of laser eye surgery services cannot claim input tax credits (“ITCs”) for GST paid on business inputs related to the supply of these services, although they may be entitled to a public sector body rebate. GST returns where ITCs were claimed should therefore be amended.

Issue and Decision:

A commonly used laser surgical procedure for the correction of defective vision is photorefractive keratotomy (“PRK”). PRK utilizes laser equipment to remove corneal tissue from the eye to correct refractive errors such as myopia and astigmatism. This procedure is performed only by accredited surgeons (ophthalmologists) entitled under the laws of a province or territory to practice the profession of medicine.

PRK is not covered under provincial or territorial health care insurance plans. Consumers opting for the surgery must pay for the service themselves or find an alternative means of payment, such as through a private insurance plan.

Section 5 of Part II of Schedule V to the Act provides that the following supply is exempt from the GST:

“A supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes).”

For the purposes of qualifying for the above exemption, the supply of PRK services is not considered to be cosmetic surgery. That is, we do not consider cosmetic surgery to include PRK because the principal goal of PRK is the improvement of the patient's vision.

The supply of PRK laser surgery is considered a “treatment or other health care service rendered to an individual”. Consequently PRK is an exempt supply for GST purposes pursuant to section 5 of Part II of Schedule V to the Act .

Since the supply of PRK is an exempt supply, suppliers of PRK will not be able to claim ITCs for the GST paid by them on the purchase of the equipment and other costs related to performing the PRK surgery. However, they may be entitled to a public service body rebate.

Invoicing practices may result in suppliers issuing a single bill for PRK itemizing the practitioner's fee and the facility charge separately. In this situation, we would regard the supply as being a single, exempt supply of laser eye surgery regardless of whether the bill shows a single amount or shows the split between the practitioner's fee and the facility charge.

However, if the facility charge were billed separately from the practitioner's fee, the facility charge would be treated as consideration for a separate supply. This separate supply would be taxable unless the facility were a health care facility making a supply of an institutional health care service, in which case the supply would be exempt pursuant to section 2 of Part II of Schedule V to the Act .

Section 2 of Part II of Schedule V to the Act provides that the following supply is exempt from the GST:

“A supply of an institutional health care service made by the operator of a health care facility to a patient or resident of the facility, but not including a service related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes.”

SAMPLE RULING

Statement of Facts

1. “Laser Clinic” is engaged in the provision of outpatient surgery specializing in photorefractive keratotomy (“PRK”).
   
2. PRK is a surgical procedure which utilizes laser equipment to remove corneal tissue and corrects refractive errors such as myopia and astigmatism. The surgery is performed only by accredited surgeons (ophthalmologists) licensed to practice the profession of medicine in a province or territory in Canada.
   
3. PRK is not an insured service under provincial or territorial health care insurance plans.

Transactions

Two separate charges, namely, the facility charge and the practitioner's fee are itemized separately on the Laser Clinic's invoice to the patient. The facility charge includes the cost of space, equipment, staff, medical supplies and the use of the laser equipment.

Rulings Requested

What is the GST status of the practitioner's fee? What is the GST status of the facility charge?

Rulings Given

Based on the facts set out above, it is the Department's position that both the practitioner's fee and the facility charge are considered to be consideration for a single supply of a health care service which is exempt of the GST pursuant to section 5 of Part II of Schedule V to the Act .

The supply of the laser eye surgery is considered to be a single supply of a health care service notwithstanding that the invoice for the supply is split between an amount for the surgery service and a facility charge for the use of the facility. The total consideration is GST exempt.

This ruling is subject to the general limitations and qualifications outlined in the GST Memoranda Series (1.4). 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 , and that you have fully described all necessary facts and transactions for which you requested a ruling.

SAMPLE RULING

Statement of Facts

1. “Laser Clinic” is engaged in the provision of outpatient surgery specializing in photorefractive keratotomy (“PRK”).
   
2. PRK is a surgical procedure which utilizes laser equipment to remove corneal tissue and corrects refractive errors such as myopia and astigmatism. The surgery is performed only by accredited surgeons (ophthalmologists) licensed to practice the profession of medicine in a province or territory in Canada.
   
3. PRK is not an insured service under provincial or territorial health care insurance plans.
   
4. Laser Clinic is a health care facility supplying an institutional health care service for purposes of section 2 of Part II of Schedule V to the Act .

Transactions

Two separate invoices are sent to the patient. On one invoice, the facility charge is billed by the Laser Clinic. This charge includes the cost of space, equipment, staff, medical supplies and the use of the laser equipment. On the second invoice, the practitioner's fee is billed by the medical practitioner.

Rulings Requested

What is the GST status of the practitioner's fee? What is the GST status of the facility charge?

Rulings Given

Based on the facts set out above, it is the Department's position that there are two separate supplies. The supply of the laser eye surgery service is considered to be a separate supply from the supply of the institutional health care service.

The practitioner's fee is considered to be the consideration for a supply of a health care service which is exempt of the GST pursuant to section 5 of Part II of Schedule V to the Act . The facility charge is considered to be the consideration for a supply of an institutional health care service which is exempt of the GST pursuant to section 2 of Part II of Schedule V to the Act .

This ruling is subject to the general limitations and qualifications outlined in the GST Memoranda Series (1.4). 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 , and that you have fully described all necessary facts and transactions for which you requested a ruling.