GST/HST Ruling

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 49358
XXXXX	November 2, 2004

Subject:

GST/HST INTERPRETATION Services Provided by Speech-Language Pathologists

Dear XXXXX:

Thank you for your letter XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services provided by speech-language pathologists.

Interpretation Requested

You are requesting clarification on the GST/HST exemption contained in paragraph 7(h) of Part II of Schedule V to the Excise Tax Act (the "ETA") to services provided by speech-language pathologists (SLPs). You indicated that the services provided by SLPs are diverse and you would like confirmation as to whether the entire scope of services that they provide would fall within the exemption. We understand these services as follows:

•   Direct service delivery, where one SLP provides services to an individual client or a group of individual clients.

•   Consultative service delivery, where an SLP provides information regarding intervention target, procedures and context to another agent of intervention, such as parents, classroom teachers, supportive personnel, and it is the second agent that carries out the program for the individual based on the information provided to the agent by the SLP.

•   Collaborative service delivery, where an SLP works with one or more students who have been identified as having speech-language disorders in collaboration with a classroom teacher or other personnel in the classroom or clinical setting.

In addition, SLPs provide education and counselling services for people experiencing communication and swallowing difficulties, and work closely with other professionals, sometimes as part of a multi-disciplinary team, in which they are participants in a coordinated program of care for an individual.

You advised that the XXXXX. SLPs work in a variety of health and educational settings, such as:

•   Hospitals,

•   Public health units,

•   Community health centres,

•   Schools,

•   Children's treatment centres,

•   Community Care Access Centres,

•   Private practice,

•   Preschool settings and daycare centres,

•   Resource centres,

•   Facilities for developmentally or physically challenged individuals, and

•   Nursing homes and long-term care facilities.

You indicated that the duties of an SLP include the following:

•   Administering tests and examinations and observing patients to diagnose and evaluate speech, voice resonance, language, cognitive linguistic and swallowing disorders.

•   Planning and implementing remedial programs to correct speech, language and voice disorders.

•   Establishing group and personalized care plans working as a member of an interdisciplinary team.

•   Conducting research on speech and other communication disorders and on the development and design of diagnostic procedures and devices.

•   Instructing students and other personnel.

Interpretation Given

As you are aware, paragraph 7(h) of Part II of Schedule V to the ETA exempts a supply of speech therapy services when rendered to an individual, where the supply is made by a practitioner of these services; i.e., a person who practices the profession of speech therapy. ^[v]1 Note that a practitioner of speech therapy services is defined in that Part as a person who is licensed or otherwise certified to practice the profession of speech therapy in the province in which he or she supplies his or her services. Where the supplier is not required to be licensed or otherwise certified to practice the profession of speech therapy in the province in which the service is supplied, the supplier must have the equivalent qualifications required to be licensed or certified in a province where there is such a requirement.

The exemption for speech therapy services supplied by a speech therapist is not dependent on who pays for the supply. For instance, a speech therapist may treat an individual for a speech dysfunction, but bill another person for payment of that service.

Basically, the exemption applies to speech therapists in private practice who are licensed or otherwise certified to practice the profession of speech therapy in the province in which they supply their services. The exemption does not apply to speech therapy services supplied by other persons, such as governments, institutions, corporations, and other organizations, as these persons do not meet the legislative criteria of being a supplier who practises the profession of speech therapy. ^[vi]2

With respect to the various health and educational settings that you identified in your letter, it is unclear as to whether the services provided in these settings are in fact supplies made by speech therapists in private practice, or whether the speech therapists are employees of the institution, organization, etc. If a speech therapist is an employee, please note that under the ETA, services provided by employees to their employers are not supplies, and therefore no GST/HST applies to wages or salaries paid to employees. However, as noted above, the exemption would not apply to the institution or organization's supplies, notwithstanding the qualifications of its employees.

As a transactional tax the application of the GST/HST is determined on a supply-by-supply basis. The approach behind the exemptions in Part II of Schedule V to the ETA is to exempt a supply of a particular service rendered to an individual on a fee-for-service basis. This is evident in the wording of the provisions of that Part, which describes supplies of particular services rendered to individuals. The exemption in paragraph 7(h) of that Part is explicit in its limited application to a speech therapy service supplied and rendered by a person with specific professional qualifications to an individual. In addition, within the context of this exemption there is a direct connection between the speech therapy service and the individual to whom the service is rendered. Evidence that the legislative criteria is met would generally involve a billing by the speech therapist to the individual for a service rendered, or to a third party who is paying for the speech therapy service on behalf of the individual. A situation that does not involve a billing by the speech therapist for this service would have to be evaluated to determine whether the legislative criteria are met; i.e., that a practitioner of speech therapy as defined in the ETA made the supply and the supply constituted a speech therapy service rendered to an individual.

The direct service delivery of speech therapy services between a speech therapist and an individual that you described would fall within the scope of the exemption where the supplier of this service is in fact the speech therapist. Whether the consultative and collaborative models of service delivery that you described fall within the scope of the exemption will be a question of fact, as it depends on whether these services are supplies made by a speech therapist "practitioner" as defined in the ETA of speech therapy services rendered to an individual.

For example, in the collaborative service delivery context, the extent of collaboration with a classroom teacher or other personnel in the classroom or clinical setting requires further explanation to determine the extent that this method of service delivery is that of a speech therapy service rendered to an individual or whether the interaction with the students is an aspect of a different supply.

Because of the explicit wording of the exemption, we would not consider the criteria for the exemption to be met for general services supplied by a speech therapist. For example, where a speech therapist enters into a contract with an organization to provide services such as data collection, case management, supervision, documentation and writing reports, conducting research, instructing other health care personnel, and program planning of a general nature, these services would not fall within the scope of the exemption as they do not constitute a speech therapy service rendered to an individual. A contract that does not identify specific speech therapy services to be provided to specific individuals is not indicative of a supply of a speech therapy service rendered to an individual and therefore this type of contract would not constitute an exempt supply described in paragraph 7(h) of Part II of Schedule V to the ETA.

In conclusion, because the criteria set out in the exemption limits its application to speech therapy services rendered to an individual when supplied by a licensed or certified speech therapist, the entire scope of services provided by SLPs that you described would not be exempt from the GST/HST.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, 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 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) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division

2004/11/02 — RITS 50061 — Services Supplied by XXXXX [Instructors and Therapists]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th Floor 320 Queen Street Ottawa, ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 54536
XXXXX XXXXX	December 23, 2004

Subject:

GST/HST APPLICATION RULING Supply of three varieties of organic flax oil

Dear XXXXX:

Thank you for your letter XXXXX, with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of three varieties of organic flax oil.

Statement of Facts

Our understanding of the facts is as follows:

1. XXXXX (Product A):

•   Is available in a XXXXX ml container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

•   Other ingredients listed are: XXXXX.

2. XXXXX (Product B):

•   Is available in a XXXXX ml container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

3. XXXXX (Product C):

•   Is available in a XXXXX L container.

•   Packaging states: XXXXX.

•   Packaging states: XXXXX.

•   Directions for use are: XXXXX.

•   Ingredients are: XXXXX.

Ruling Requested

You have requested a ruling concerning the application of the GST/HST to the supply of Products A, B and C.

Ruling Given

Based on the facts set out above, we rule that all supplies of Products A, B and C are zero-rated as basic groceries.

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 (ETA), or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Taxable supplies of goods and services made in Canada are generally subject to tax at 7% GST or 15% HST, as applicable. However, "zero-rated" supplies of goods and services are subject to tax at 0%. A zero-rated supply is any supply included in Schedule VI to the ETA.

Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages) unless one of the exclusions set out in paragraphs 1(a) through 1(r) applies.

The terms "food", "beverage" and "ingredient" are not defined in the ETA. However, the position of the Canada Revenue Agency (CRA) is that these terms are to be construed according to their ordinary meaning. Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product added to flavour, texture or appearance of the final product; that is, if it was integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, must be considered to be a food or beverage by the average consumer.

Based on the suggested uses identified on the product packaging for the above products, the CRA considers Products A, B and C to be ingredients. As such, they are within the preamble to Section 1 of Part III of Schedule VI to the ETA and are zero-rated.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Nicole Thomas, CMA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/11/29 — RITS 54669 — Section 186 of the Excise Tax Act

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 56001
XXXXX XXXXX XXXXX	December 16, 2004

Subject:

GST/HST APPLICATION RULING XXXXX

Dear XXXXX:

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of XXXXX (the Product).

Statement of Facts

Our understanding of the facts is as follows:

1. The Product is a baked XXXXX cracker snack that is available in XXXXX varieties: XXXXX.

2. Ingredients of the XXXXX flavour of the Product are: XXXXX.

3. The Product is labelled as a chip and is packaged loosely in XXXXX gram XXXXX bag XXXXX.

4. Packaging includes statements such as XXXXX, XXXXX, XXXXX and XXXXX.

5. Market research indicates that consumers would purchase the Product instead of snacking crackers or chips. Because they are baked, consumers view them as healthier than chips.

Ruling Requested

You requested the tax status of the Product.

Ruling Given

Based on the facts set out above, we rule that supplies of the Product are taxable at 7% GST or 15% HST, as applicable.

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 (ETA), or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Generally, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the GST rate of 7% or HST rate of 15%, as applicable, on the value of the consideration for the supply. However, zero-rated supplies of goods and services are subject to tax at 0%. Section 1 of Part III of Schedule VI to the ETA zero-rates supplies of basic groceries subject to the exclusions listed in paragraphs 1(a) through 1(r).

Paragraph 1(f) excludes from zero-rating supplies of:

"chips, crisps, puffs, curls or sticks (such as potato chips, corn chips, cheese puffs, potato sticks, bacon crisps and cheese curls), other similar snack foods or popcorn and brittle pretzels, but not including any product that is sold primarily as a breakfast cereal".

GST/HST Policy Statement P-241 - Meaning of "Other Similar Snack Food" under paragraph 1(f) of Part III of Schedule VI to the ETA, provides several factors that may be used to determine if a product is a similar snack food. These factors include: properties (ingredients, flavours, texture, cooking process and appearance), labelling, packaging and marketing.

In this case, the Product is available in flavours that are typical to snack foods as listed in P-241. Also, the appearance (small, thin slice) and the texture (crunchy) are similar to those products enumerated under paragraph 1(f). Furthermore, the Product name and labelling includes the term "chip". Although we consider placement of a product in store aisles as a relevant consideration, it alone is not considered a determinative factor.

Having reviewed the facts of this case, it is the opinion of the CRA that the Product is an "other similar snack food" as listed in paragraph 1(f) of Part III of Schedule VI to the ETA and as such, supplies of the product are taxable at 7% GST or 15% HST, as applicable.

It should be noted that no one factor is determinative of the tax status of a product and changes in the labelling, packaging and/or marketing would not necessarily result in a different tax status. That is, all factors must be considered in determining whether a product falls within paragraph 1(f).

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9585.

Yours truly,

Nicole Thomas, CMA
Goods Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2004/12/01 — RITS 56427 — Eligibility by an Orthodontist for Input Tax Credits

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX	Case Number: 56819
XXXXX XXXXX XXXXX	December 23, 2004

Subject:

Temporary Importation of Amusement Rides

Dear XXXXX:

Thank you for your letter XXXXX requesting partial relief of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) payable on the temporary importation of the amusement rides.

Statement of Facts

1. XXXXX intends to temporarily import the following amusement rides for use at fairs and exhibitions across Canada:

•   XXXXX

•   XXXXX

•   XXXXX

•   XXXXX

2. The amusement rides will be imported through XXXXX. The rides will be imported into Canada during the months of XXXXX through to and including XXXXX and will be in Canada for less than one year.

3. Neither title to nor beneficial use of the amusement rides is intended to pass, or passes, to a person while the amusement rides are in Canada.

4. The amusement rides are not imported for the purpose of further manufacture, alteration, processing, repair, or maintenance.

TEMPORARY IMPORTATION OF AMUSEMENT RIDES

Based on the above facts, the Canada Revenue Agency (CRA) will recommend that the GST/HST payable on the importation of the amusement rides be partially relieved by way of a special Order in Council. The GST/HST will be payable only on 1/60th of the value of the amusement rides for each month or portion thereof that the rides are in Canada. This recommendation is supported by the Department of Finance.

In view of the facts of the case, it was not possible to complete the order and obtain approval of the Governor in Council prior to the importation. Consequently, CRA will allow the importation on a 1/60th basis pending approval by the Governor in Council of the order, on the understanding that GST/HST, together with any interest and penalty, would be payable if approval is not granted or if the terms of the order are not met.

This letter is valid for a period of XXXXX from XXXXX, to permit the importation of the amusement rides. Special authority number XXXXX is to be shown in the special authority field on the Canada Border Services Agency (CBSA) accounting document as applying to amusement rides. A copy of this letter will be sent to Ms. Debbie Arcand, Manager, Trade Incentives and Refunds Unit, Trade Policy and Interpretation Directorate, CBSA in Ottawa. Please contact your local CBSA office with this letter for additional information concerning import procedures and export requirements.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact Donato Licursi at (613) 952-4294.

Yours truly,

John Sitka
Director
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Policy and Planning Branch

2004/12/23 — RITS 56822 — Temporary Importation of Amusement Rides

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

TO:	George Weatherley Manager GST/HST Domestic Rebates 750 Heron Road
FROM:	Owen Newell, CGA General Operations Unit General Operations & Border Issues Division Excise & GST/HST Rulings Directorate

Subject:

Will the Canada Revenue Agency ("CRA") consider a rebate to have been filed where photocopied invoices are submitted with the rebate rather than original invoices?

This memorandum is further to our XXXXX meeting with Joe Nichols of Domestics Rebates and Sharon Heidinger, A/Manager of the Pre-Payment Risk Assessment, Audit Program Operations Division. At issue were rebate entitlements in circumstances where insufficient/incomplete documentation is submitted with a general rebate application.

Background Information

Reassessments of general rebates frequently occur where the rebate claimant submits photocopied receipts or does not send in their proof of export along with their rebate application. On occasion, the claimant sends in the required information to support their rebate claim, however, this may occur after the two-year filing deadline for the rebate has expired.

Issues

Will the CRA consider a general rebate to be filed where photocopied invoices are submitted, rather than original invoices with the rebate application?

Will the CRA consider the rebate applicant to have filed two separate rebate applications with respect to the same transaction where the applicant subsequently resubmits their rebate application with all of the appropriate supporting documentation (e.g., original invoices rather than photocopies)?

Where a rebate claimant initially submits their rebate application to the CRA accompanied by photocopied invoices, and then subsequently resubmits their rebate application accompanied by the original invoices/documentation, on what date will the CRA consider the rebate to have been filed:

•   the date on which the initial rebate was received, or alternatively

•   the date on which the rebate was received with all of the appropriate supporting documentation?

Decisions:

If the rebate application was filed in the prescribed form, and the prescribed manner, the CRA will consider a general rebate to have been filed by the claimant, notwithstanding the fact that photocopied invoices were submitted with the rebate application rather than original invoices.

It is our position that a rebate applicant would not be considered to have submitted a new or second rebate claim in respect of the same transaction in such circumstances, but rather, has simply requested a reassessment of a previously filed rebate claim where the applicant subsequently resubmits their rebate claim along with the original invoices.

Subsection 334(1) of the ETA provides that for the purposes of Part IX of the ETA, and subject to subsection 334(2) of the ETA, anything sent by first class mail or its equivalent will be considered to have been received by the person to whom it was sent on the day it was mailed. As such, the CRA will consider the initial date the rebate application was mailed to be the date the application was filed.

Explanation

Where a rebate application has been assessed, subsection 297(2) of the ETA provides that the Minister has the option to reassess or make an additional assessment of the amount of a rebate, notwithstanding any previous assessment of the amount of the rebate.

Where the CRA has the option to reassess a rebate application, it may consider doing so. Subsection 298(2) of the ETA provides that a reassessment of a rebate under section 297 of the ETA shall not be made more than four years after the day the application for the rebate was filed.

The CRA does have the legislative authority to reassess and approve a general rebate application in the circumstances where supporting documentation is not initially submitted, but subsequently is sent into the CRA. If a rebate has been otherwise filed in the prescribed form and the prescribed manner, but some supporting documentation is missing, the CRA will accept the rebate as being filed, and then may request the supporting documentation from the claimant.

Please note that the CRA is not bound to reassess a rebate claim. Furthermore, if the supporting documentation is not sent into the CRA within a reasonable period of time, the CRA may choose not to reassess the rebate claim. Rebate claimants cannot assume that they have an indefinite period of time to provide the CRA with documentation to support their rebate claims.

EXAMPLE

Statement of Facts

A recipient/claimant paid an amount in error to a supplier, and the cheque was dated June 16, 1998. The supplier refused to refund the tax to the recipient/claimant. As such, the recipient/claimant submitted its general rebate application to the Summerside Taxation Centre on February 1, 2000. However, the rebate application was rejected by the CRA since a photocopied invoice, rather than the original invoice, was submitted with the rebate application. A notice of assessment was issued to the recipient/claimant by the CRA with respect to the general rebate.

The recipient/claimant subsequently resubmitted their rebate application to the CRA on July 1, 2000, accompanied by the original invoice. The rebate was in respect of an amount paid in error equal to $401.45 relating to a 1998 invoice. The following information relates to the invoice and payment:

•   The date specified on the invoice from the supplier was February 1, 1998.

•   The date the recipient/claimant paid the amount to the supplier was June 16, 1998.

Issues:

Will the CRA consider the recipient/claimant to have submitted two separate rebates with respect to the same transaction where the recipient/claimant subsequently resubmits their rebate application with the original invoices? Will the CRA consider the rebate to have been filed within the two-year time limitation?

Decision:

The CRA will not consider the recipient/claimant to have submitted two separate rebate applications with respect to the same transaction when the purpose of the second submission was to provide the CRA with the original invoice. The CRA will consider the recipient/claimant to have requested a reassessment of a previously filed rebate claim. The CRA will consider the rebate application to have been filed on February 1, 2000, before the two-year time limit expired.

Explanation

The rebate application was initially submitted on February 1, 2000. The rebate was assessed by the CRA and a notice of assessment ("NOA") was issued to the recipient/claimant. In this regard, the CRA accepted the fact that the rebate application was filed, however, denied the claim on the basis that the original invoice was not submitted with the claim.

For purposes of determining the point in time at which the two-year time limitation commences with respect to the rebate, the date on which the recipient/claimant paid the amount in error is significant. In the case at hand, the recipient/claimant paid the amount in error on June 16, 1998.

Where a rebate has already been assessed, subsection 297(2) of the ETA provides the Minister with the discretion to reassess or make an additional assessment of the amount of a rebate, notwithstanding any previous assessment of the amount of the rebate.

Under subsection 261(3) of the ETA, a rebate in respect of an amount shall not be paid under subsection 261(1) of the ETA to a person unless the person files an application for the rebate within two years after the day the amount was paid or remitted by the person. In the case at hand, the recipient/claimant paid an amount in error to the supplier on June 16, 1998. As such, a rebate application to recover the amount paid in error could not have been filed later than June 16, 2000. Since the general rebate application was submitted to the CRA on February 1, 2000, the recipient/claimant did file their rebate application within the two-year time period.

Should you have any further questions, please feel free to contact me at (613) 952-0301, or Douglas Wood at (613) 954-9699.

2004/12/13 — RITS 53743 — Application of Subsection 9(2) of Part I of Schedule V to the Excise Tax Act

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX XXXXX	Case Number: 53926
	File #11950-1
XXXXX	December 10, 2004

Subject:

GST/HST INTERPRETATION Election under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the Excise Tax Act ("the ETA")

Dear XXXXX:

This letter is in response to your letter XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the acquisition and resale of real property. You have asked us to review an earlier interpretation issued to you by XXXXX.

Interpretation Requested

You want to know whether it is necessary that an individual who acquires real property with the primary intent of immediately re-supplying it needs to have a profit motive to be viewed as being engaged in an adventure or concern in the nature of trade. Where the supply by the individual is made in the course of an adventure or concern in the nature of trade, the individual may elect to treat this otherwise exempt sale of real property as a taxable sale under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA. Where the individual makes the election, the individual would be entitled to register for GST/HST purposes and as a registrant would be entitled to claim an input tax credit for the GST/HST payable in respect of the acquisition of the property.

You have stated that there is no reference to a profit expectation in subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA and that therefore it is sufficient that the individual has acquired the real property with the express intent of reselling it for the supply to be made in the course of an adventure or concern in the nature of trade.

Interpretation Given

Subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA does not specifically mention that a reasonable expectation of profit must exist with respect to the sale of the real property; rather, it refers to a supply of real property made in the course of an adventure or concern in the nature of trade.

As stated in our previous interpretation to you, it is the Canada Revenue Agency (CRA)'s view that the profit motive is considered to be a characteristic of an adventure or concern in the nature of trade, specifically in the context of an individual who acquires real property for resale on an isolated basis. However, in determining whether a sale of real property takes place in the course of an adventure or concern in the nature of trade, CRA considers also such elements as the supplier's course of conduct in dealing with the property and the activities undertaken related to the sale in light of the particular facts of the transaction. Based on the review of XXXXX, the supply was not made in the course of an adventure or concern in the nature of trade as the individual had the intention to acquire and re-sell the property without profit and the transaction has been motivated in part by the individual's desire to make a gift.

We appreciate your reference to an application ruling we issued XXXXX to a different client with a reference to subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA. You wonder why we arrived at a different conclusion even though the commentary in the ruling does not refer to whether or not the individuals receiving the property and re-supplying it had a profit motive or a profit potential.

That ruling does not indicate that the individuals are entitled to make the election under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA. In our reply, we offered no conclusion as to whether or not the supply by the individuals was made in the course of an adventure or concern in the nature of trade. In any case, the facts of the transactions must be considered on their own merits. In the case you referred to, the individuals who sold the real property did not purchase the real property from a corporation for the purpose of immediately re-supplying it. When their partnership dissolved, as partners, they were deemed to have acquired real property that they already owned.

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 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) 952-9587.

Yours truly,

B. Mulinda
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/11/12 — RITS 54049 — Tax Status of [Fruit Based Snack Foods]

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

TO	XXXXX XXXXX XXXXX
FROM:	Nathalie Joly Financial Institutions Excise and GST/HST Rulings Directorate

Subject:

Segregated Fund Early Withdrawal Fees

This is in reply to XXXXX addressed to our office with respect to the application of the Goods and Services Tax (GST) to the Segregated Funds early withdrawal fees of XXXXX.

All legislative references are to the Excise Tax Act (ETA) unless otherwise noted.

Background

We have reviewed the documents submitted by you and our understanding of the situation is as follows:

1. XXXXX.

2. Insurers receive early withdrawal fees or back end load fees from their segregated fund activity. The amounts received from the segregated fund by the insurer for any withdrawal by the insured/investor is determined by a sliding scale formula in the insurance contract.

3. The early withdrawal fees or back end loads used by the insurers are a type of cost recovery mechanism so that higher costs associated with the early years of the insurance/investment contract will be recovered. These costs are primarily distribution costs. XXXXX. Under the current legislation this amount appears to be taxable from XXXXX. XXXXX.

4. Note from the section on early withdrawal fees that the owner is clearly identified as being directly subject to early withdrawal fees. XXXXX.

5. Besides being a disincentive for early withdrawal, the early withdrawal fees are a recovery of distribution costs.

6. You indicated that based on the Investment Fund Information folder for XXXXX, the early withdrawals are deducted from the policyholders segregated fund balance and transferred to the insurer's general fund.

7. XXXXX you required XXXXX the following information and documentation so that the nature of the early withdrawal fees for segregated funds could be verified:

(a) A sample copy of an actual policy or contract for a segregated fund detailing the early withdrawal fees and other fees stipulated in the policy or contract XXXXX.

(b) Provide information, which shows how the funds flow. Assume this example. A Seg fund investor owns a $1,000 Seg fund, which is subject to an early withdrawal fee of 5%. The policyholder withdraws the entire amount of his or her holding. Does the Seg fund pay the $950 to the policyholder and then $50 separately to the general fund XXXXX or does the Seg fund pay $1,000 to the general fund, which then withholds $50 and then in turn pays the policyholder $950. XXXXX.

(c) Please provide internal documentation that describes the duties, responsibilities and services provided by the general fund to the seg fund for XXXXX.

(d) In addition to early withdrawal fees, please provide internal documentation regarding the entitlement of the general fund to any other types of fees generated by Seg fund products for XXXXX.

8. XXXXX provided you with the following information and documentation:

(a) Investment Fund Information folder for XXXXX. Information on all fees and expenses related to segregated fund operations is included in these documents.

(b) Financial statements for XXXXX.

(c) In the documentation, the owner is clearly identified as being directly subject to early withdrawal fees.

(d) Gross withdrawals (including any back end load fees) are reported under XXXXX.

9. Since the documentation provided XXXXX does not clearly mention that the early withdrawals are deducted from the policyholders segregated fund balance and transferred to the insurer's general fund, we asked XXXXX additional documentation to support this information.

10. To this date, the documentation requested has not been provided, however, we can issue an interpretation based on the assumption that the early withdrawals are deducted from the policyholders segregated fund balance and transferred to the insurer's general fund.

Issue

Are the early withdrawal fees considered to have been acquired from the segregated fund by the insurer pursuant to paragraph 131(1)(c) or are the early withdrawal fees consideration for "the amount of a redemption" pursuant to paragraph 131(2)(a)?

Our comments

Paragraph 131(1)(c) deems amounts deducted from segregated funds to be "a taxable supply of a service and the amount shall be deemed to be consideration for the supply that becomes due at the time". Pursuant to subsection 131(2) this deeming provision found in paragraph 131(1)(c) does not apply if the amount is an income distribution, a benefit payment or an amount redeemed regarding the interest of another person in the fund. The relevant sections of the ETA read as follows:

131. (1) Segregated fund a separate person — For the purposes of this Part, a segregated fund of an insurer shall be deemed to be a trust that is a separate person from the insurer and that does not deal at arm's length with the insurer and

(a) the insurer shall be deemed to be a trustee of that trust;

(b) the activities of the segregated fund shall be deemed to be activities of the trust and not activities of the insurer; and

(c) where, at any time, an amount (other than an amount in respect of tax under this Part) is deducted from the fund,

(i) if the amount is in respect of property or a service that the fund is, because of the operation of this Part other than this paragraph, considered to have acquired from the insurer, that supply shall be deemed to be a taxable supply and the amount shall be deemed to be consideration for that supply that becomes due at that time, and

(ii) if the amount is not in respect of property or a service that the fund is, because of the operation of this Part other than this paragraph, considered to have acquired either from the insurer or another person, the insurer shall be deemed to have made, and the fund shall be deemed to have received, at that time, a taxable supply of a service and the amount shall be deemed to be consideration for the supply that becomes due at that time.

(2) Exceptions — Paragraph (1)(c) does not apply to an amount deducted from a segregated fund of an insurer if

(a) the amount is a distribution of income, a payment of a benefit, or the amount of a redemption, in respect of an interest of another person in the fund; or

(b) the amount is a prescribed amount.

123. (1) Definitions — In section 121, this Part and Schedules V to X,

"financial service" means:

(d) the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of a financial instrument,

(f) the payment or receipt of money as dividends (other than patronage dividends), interest, principal, benefits or any similar payment or receipt of money in respect of a financial instrument,

The documentation provided by XXXXX does not clearly mention that the early withdrawals are deducted from the policyholders segregated fund balance and transferred to the insurer's general fund. However, the following information is provided.

XXXXX

According to the information and documentation provided by XXXXX:

• The amount of the withdrawal by the policyholder is paid out from the segregated fund to the general fund of the insurer. This payment constitutes the amount of a redemption pursuant to paragraph 131(2)(a), and therefore paragraph 131(1)(c) does not apply. Accordingly, the amount transferred out of the segregated fund into the general fund is an exempt supply pursuant to paragraph 123(1)(f) of the definition of financial service.

• The redemption fee paid by the insured to the insurer by means of deduction from the general fund of the insurer constitutes consideration for "the transfer of ownership or repayment of a financial instrument" pursuant to paragraph 123(1)(d) of the definition of "financial service".

Should you wish to discuss this file further, please do not hesitate to contact me at (613) 941-2046.

2004/11/26 — RITS 50527 — Supply of Parking in the City XXXXX

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
XXXXX XXXXX XXXXX XXXXX	Case Number: 53412
XXXXX XXXXX XXXXX	December 12, 2004

Subject:

EXCISE TAX APPLICATION RULING XXXXX

Dear XXXXX:

Thank you for the letter XXXXX from XXXXX of your XXXXX office with attachments, and for your e-mail XXXXX and your fax XXXXX providing additional information, concerning the application of the Excise Tax to the transaction described below.

Statement of Facts

Our understanding of the facts, the transaction(s), and the purpose of the transaction(s) is as follows:

XXXXX is an Insurance Broker with offices in XXXXX.

XXXXX was directly retained or instructed by XXXXX to arrange a contract of insurance covering Errors and Omissions.

XXXXX arranged the issuance of the insurance policy through XXXXX.

XXXXX completed the incorrect form with XXXXX. The Canadian Assured Tax Form identified the contract as a direct assured business.

XXXXX issued the insurance policy number XXXXX and provided to the Canada Revenue Agency (CRA) with the information required by subsection 5(2) of the Excise Tax Act (ETA).

The CRA invoiced the XXXXX for the Excise Tax of 10% of the premium paid or payable.

Ruling Requested

The premium of $XXXXX for the policy number XXXXX issued to XXXXX is not taxable under Part I of the ETA.

Ruling Given

Based on the facts set out above, we rule that the premium of $XXXXX for the policy number XXXXX issued to XXXXX is not taxable under Part I of the ETA.

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 our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Under subsection 4(1) of the ETA, the tax does not apply to a contract of insurance with any insurer authorized under the laws of Canada to transact the business of insurance if the contract is entered into through a broker in Canada.

Under subsection 4(4) of the ETA, where a contract of insurance is entered into or renewed through more than one broker or agent, the contract is deemed to have been entered into or renewed through the broker or agent directly retained or instructed by the insured and not through any other broker or agent.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-6720.

Yours truly,

Denis Linteau
Other Levies Unit Unit
Excise Duties and Taxes Division Division
Excise and GST/HST Rulings Directorate

2004/12/14 F — RITS 56109 — Inquiétudes concernant les rapports mensuels

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 183170

Dear [Client]:

Subject: GST/HST RULING
Tax status of health-related services

Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the supplies of health-related services made by […](The Corporation). We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

We understand the facts to be:

1. […][The Corporation operates in Ontario].

2. The Corporation is registered for GST/HST.

3. The Corporation is a supplier of various health services.

4. All of the Corporation’s services are completed at the Corporation’s facilities.

5. The Corporation requires all individuals to have a referral from their physician in order to receive any of the Corporation’s services.

6. The Corporation employs technicians and other staff. It does not employ any physicians or other medical practitioners. The Corporation seeks out reading physicians as needed.

7. Reading physicians attend the facilities of the Corporation to monitor all tests that require the presence of a physician. The reading physicians additionally may attend the Corporation’s facilities to interpret the results of the tests completed by the Corporation.

8. The Corporation is engaged in the supply of certain health care services which may be fully covered under the Ontario Health Insurance Plan (OHIP) including: […]

The Corporation performs these particular services primarily for the purpose of diagnostic, treatment, relieving or remedying, maintenance and/or prevention of disease.

9. The Corporation has a group billing number which allows it to submit billings to OHIP on behalf of the reading physicians for all of the medical and diagnostic services rendered to individuals. The reading physicians, who are lawfully entitled to the entire payment for the diagnostic services, have provided direction to the Ministry of Health and Long-Term Care (MOHLTC) to forward all OHIP payments for the supply of the insured diagnostic services to the Corporation directly.

10. The fees for diagnostic services that are insured under the OHIP (insured services) are comprised of both a professional component and technical component, as legislated by OHIP. The elements of the professional component and the technical component have been defined separately under the Health Insurance Act for the purposes of setting the billing rates for services.

11. A document published by the MOHLTC, titled “Schedule of Benefits — Physician Services under the Health Insurance Act (December 22, 2015 (Effective March 1, 2016))”, lists the specific elements for the professional and technical components for diagnostic and therapeutic procedures.

The Schedule lists the following elements for the professional component:

A. Providing clinical supervision, including approving, modifying and/or intervening in the performance of the procedure where appropriate.

B. Performance of any clinical procedure associated with the diagnostic procedure which is not separately billable.

C. Where appropriate, post-procedure monitoring, including intervening except where this constitutes a separately billable service.

D. Interpreting the results of the diagnostic procedure.

E. Providing premises for any aspect(s) of A and D that is (are) performed at a place other than the place in which the procedure is performed.

The elements of the technical component are:

A. Preparing the patient for the procedure.

B. Performing the diagnostic procedure(s).

C. Making arrangements for any appropriate follow-up care.

D. Preparing and providing records of the results of the procedure to the interpreting physician.

E. Discussion with, and providing information and advice to, the patient or patient's representative, whether by telephone or otherwise, on matters related to the service.

F. Preparing and transmitting a written, signed and dated interpretative report of the procedure to the referring physician.

G. Providing premises, equipment, supplies and personnel for all specific elements of the technical and professional components except for the premises for any aspect(s) of A and D of the professional component that is(are) not performed at the place in which the procedure is performed.

12. The professional fee portion of the OHIP billing is sent by the Corporation to the reading physicians, and the technical fee portion is retained by the Corporation.

13. The Corporation is also engaged in the supply of similar health care services which are not always covered under OHIP (uninsured services) and which instead may be requested by a physician and paid for through a third party (e.g., Blue Cross, insurance companies, employer, individual directly) including Ambulatory blood pressure monitoring. The Corporation performs the services for the purpose of diagnostic, treatment, relieving or remedying, maintenance and/or prevention of disease.

14. The services supplied by the Corporation that are not insured under OHIP are billed to the third party (Blue Cross, insurance companies, employers, etc.) by the Corporation directly. These billings include both the professional and technical fees.

15. Services supplied by the Corporation and rendered to individuals that are not insured by OHIP or requested by a third party are billed directly to the individual. […].

16. An individual has no ability to substitute or eliminate the various components of the diagnostic assessments ordered.

17. The diagnostic services in the context of the Corporation’s insured services are a compilation of several elements inter-dependent on each other. More specifically, the diagnostic supply includes:

1. Providing the premises and all equipment, supplies, personnel, and the other necessary elements;

2. Preparing the individual patient which includes attaching electrodes and monitoring of the patient and equipment during the procedures;

3. Performing the test, study or analytical procedure including all required clinical procedures associated with the diagnostic service

4. Providing supervision including the monitoring and intervening during the performance of the test, study or analytical procedure along with quality control of each element of the activities;

5. Monitoring and intervening as required following the completion of the test, study or analytical procedure;

6. Compiling, summarizing and providing the records of the results of the test, study or analytical procedure;

7. Providing information and discussions with the individual patient on matters related to the test, study or analytical procedure;

8. Preparing and transmitting the written, signed and dated interpretive report of the diagnostic service to the referring medical practitioner;

9. Interpreting the results, study or analytical procedure (generally the only step in the diagnostic process completed solely by the reading physician).

18. You stated that of the […][nine] steps listed above, the Corporation principally performs […][eight]. Each individual step is not a diagnostic service. A diagnostic service is the aggregate of these elements. The interpretation of the results as performed by the reading physician can only occur if the Corporation supplies its services. While the interpretation is a crucial component of the work, it is not the only component and it cannot transpire without first having the other elements concluded.

19. There are no written contracts for services; that is, there are no written contracts for services between the Corporation and the reading physician, and no written contracts between the Corporation and the patients (or third parties or referring physicians).

RULING REQUESTED

You would like to know:

1. whether the supply of services that are insured under OHIP and provided by the Corporation is part of a single supply of a diagnostic and therapeutic procedure rendered to an individual;

2. whether the supply of those services is exempt pursuant to section 10 of Part II of Schedule V.

RULING GIVEN

Based on the facts set out above, we rule that

1. the supply of services provided by the Corporation that include the services by the reading physician and that are insured under OHIP, is a single supply of a diagnostic service rendered to an individual;

2. the supply of diagnostic services by the Corporation is exempt pursuant to section 10 of Part II of Schedule V subject to the application of sections 1.1 and 1.2 of Part II of Schedule V.

EXPLANATION

Generally, all supplies of property and services made in Canada are taxable unless an exemption from the GST/HST applies. Taxable supplies are supplies made in the course of a commercial activity and may be taxable at the rate of 0% (zero-rated supplies), 5%, 13%, or 15% on the value of the consideration for the supply depending on the province in which the supply is made. Zero-rated supplies are included in Schedule VI. Exempt supplies are not subject to the GST/HST and are included in Schedule V.

Part II of Schedule V to the ETA provides that certain health care services are exempt from the GST/HST. Specifically, section 10 of Part II exempts a supply of a prescribed diagnostic, treatment or other health care service rendered to an individual if the supply is made on the order of a “medical practitioner” or a “practitioner”; a registered nurse authorized under the laws of a province to order such a service if the order is made within a nurse-patient relationship; or a person that is entitled under the laws of a province to practise the profession of pharmacy and is authorized under the laws of the province to order such a service, if the order is made within a pharmacist-patient relationship. The terms “medical practitioner” and “practitioner” are defined in section 1 of that Part.

Section 2 of the Health Care Services (GST/HST) Regulations provides that for the purposes of section 10 of Part II of Schedule V, the following services are prescribed:

(a)  laboratory, radiological or other diagnostic services generally available in a health care facility; and

(b)  the administration of drugs, biologicals or related preparations in conjunction with the provision of services included in paragraph (a).

The application of section 10 of Part II of Schedule V is limited by sections 1.1 and 1.2 of that Part. Sections 1.1 and 1.2 deem supplies that are made for cosmetic purposes and supplies that are not qualifying health care supplies to not be included in Part II of Schedule V.

Read together, the provisions provide that the exemption under section 10 of that Part is dependent upon the purpose for which the supply is made. For the exemption to apply, the supply has to be made for at least one of the enumerated qualifying health care supply purposes and not be a cosmetic service supply.

The supply made by the Corporation is composed of several elements that are described in the facts above. The first step in determining the tax status of the supply made by the Corporation would be to determine if the Corporation is making a single supply or multiple supplies consisting of each of the elements described.

Single/Multiple Supplies

Where a transaction consists of several elements, there may be a single supply or multiple supplies. This distinction is important, for example, in cases where a combination of elements is supplied, some of which would be exempt for GST/HST purposes and some of which would not if supplied separately. It is a question of fact whether the person is making a single supply or multiple supplies.

The characterization of a transaction as a single supply or multiple supplies considers the interrelationships among the various elements of the agreement, the purpose of the agreement, the needs of the customer, and the economic reality of the transaction. There is a single supply where one or more elements constitute the supply and any remaining elements serve only to enhance the supply. Where the essential elements are part of a single composite supply, that single supply cannot be artificially split into separate supplies.

Multiple supplies occur when one or more of the elements can sensibly or realistically be broken out. Conversely, two or more elements are part of a single supply when the elements are integral components; the elements are inextricably bound up with each other; the elements are so intertwined and interdependent that they must be supplied together; or one element of the transaction is so dominated by another element that the first element has lost any identity for fiscal purposes.

When performing an analysis, it is important that the analysis be confined to the transaction at issue, rather than referring to other possible transactions containing the same or similar elements. This process should not involve artificially splitting something that commercially is a single supply.

For a supply with several components, an analysis would consider how the components work together, the needs of the recipient, and identify which components are ancillary or merely optional accessories or attachments.

Although concluding whether a single supply or multiple supplies are made always depends on the facts surrounding a particular transaction, including the terms of any relevant agreements, GST/HST Policy Statement P-077R2, Single and Multiple Supplies, provides additional information on determining whether a single supply or multiple supplies are being provided.

P-077R2 lists the following questions that may assist in this determination:

* Is the property or service provided by two or more suppliers?

* Is there more than one recipient?

* What did the supplier provide for the consideration received?

* Is the recipient made aware of the elements (in detail) that are part of the package?

* In the context of the particular transaction, does the recipient have the option to acquire the elements separately or to substitute elements?

In addition, an important question to consider is what has been supplied for the payment made. Policy Statement P-077R2 also explains that the way in which the consideration for a transaction is set out does not in itself determine whether there are one or more supplies. A single consideration does not automatically mean that there is one supply. Equally, separately identified consideration for certain elements do not necessarily mean that there are two or more supplies. Thus, one cannot rely solely on the breakdown of charges in an agreement or on an invoice to conclude that a supplier is making multiple supplies of different goods and/or services.

The key factor to consider in making the determination as to what, and how many, supplies are made in a particular situation is the need/purpose of the client when requesting the Corporation's services. From a supplier point of view, one must consider what the Corporation is being requested to do or to provide that satisfies the request or need of the client.

In this case, it is the CRA’s view that the Corporation is making a single supply of services rendered to the individuals. From the individual’s point of view, they go to the clinic to get tested and that includes a reading of the results. According to the facts, each of the procedures provided by the Corporation includes an involvement of a reading physician. Therefore, we can conclude that the Corporation is making a single supply.

The next step in determining the tax status of the supply made by the Corporation is to characterize the supply.

Section 10 of Part II of Schedule V exempts a supply of a prescribed diagnostic, treatment or other health care service rendered to an individual if the supply is made on the order of a “medical practitioner” or a “practitioner”, as those terms are defined in section 1 of Part II of Schedule V; a registered nurse authorized under the laws of a province to order such a service if the order is made within a nurse-patient relationship; or a person that is entitled under the laws of a province to practise the profession of pharmacy and is authorized under the laws of the province to order such a service.

A diagnostic service contains several constituent elements. These constituent elements generally include both technical and professional components. The CRA would evaluate supplies made by the Corporation with reference to the following constituent elements of a diagnostic service to determine whether section 10 of Part II of Schedule V would apply:

* Providing the premises, equipment, supplies and personnel for all elements of the technical and professional components;

* Preparing the patient for the diagnostic service;

* Performing the test, study or analytical procedure, including any clinical procedure associated with the diagnostic service;

* Providing clinical supervision, including approving, modifying and intervening in the performance of the test, study or analytical procedure and quality control of all elements of the procedure;

* Monitoring and intervening if necessary after the test, study or analytical procedure;

* Preparing and providing records of the results of the test, study, or analytical procedure to a medical practitioner;

* Interpreting the results of the test, study or analytical procedure, which is generally performed by a medical practitioner;

* Discussion with the patient on matters related to the diagnostic service; and

* Preparing and transmitting a written, signed and dated interpretative report of the diagnostic service to the referring medical practitioner or practitioner.

Each individual element of a diagnostic service is not a separate diagnostic service. The diagnostic service is the aggregate of all of these elements.

For the insured service scenario, the Corporation performs most of these elements. The element of “Interpreting the results of the test, study or analytical procedure”, is performed by a reading physician who is contracted by the Corporation for those services. The services provided by the reading physician constitute an input to the Corporation’s services, allowing it to provide diagnostic services to their clients.

The service provided by the Corporation is thus a cumulative aggregation of the service elements performed by its employees and the reading physician. This aggregate service provided by the Corporation encompasses all the elements of a “diagnostic service” and is thus characterized as a “diagnostic service”.

The supply of those diagnostic services meet the conditions for exemption under section 10 of Part II of Schedule V.

Qualifying health care supplies and cosmetic service supplies

Where a supply by the Corporation meets the exemption criteria of section 10 of Part II of Schedule V, it also has to satisfy the criteria of sections 1.1 and 1.2 of Part II of Schedule V. Section 1.1 of Part II of Schedule V generally provides that a supply that is, or is in respect of, a cosmetic service supply is not exempt, even if the supply otherwise meets the criteria of an exempting section in Part II of Schedule V. Section 1.2 of Part II of Schedule V generally provides that a supply that is not a qualifying health care supply is similarly not exempt, even if the supply otherwise meets the criteria of an exempting section in Part II of Schedule V .

Section 1.1 of Part II of Schedule V specifically provides that, “for the purposes of this Part, other than section 9, a cosmetic service supply and a supply, in respect of a cosmetic service supply, that is not made for medical or reconstructive purposes are deemed not to be included in this Part.” This section clarifies that a cosmetic service supply, and a supply of any property or service in respect of a cosmetic service supply that is not made for medical or reconstructive purposes, are not considered basic health care and are excluded from the exempting provisions (other than section 9) in Part II of Schedule V.

The term “cosmetic service supply” is defined in section 1 of Part II of Schedule V to mean, “a supply of property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.”

Section 1.2 of Part II of Schedule V specifically provides that, “for the purposes of this Part, other than sections 9 and 11 to 14, a supply that is not a qualifying health care supply is deemed not to be included in this Part.”

The term “qualifying health care supply” is defined in section 1 of Part II of Schedule V to mean, “a supply of property or a service that is made for the purpose of

a) maintaining health,

b) preventing disease,

c) treating, relieving or remediating an injury, illness, disorder or disability,

d) assisting (other than financially) an individual in coping with an injury, illness, disorder or disability, or

e) providing palliative health care.”

Supplies of property or services are not “qualifying health care supplies” if they are not made for at least one of these purposes. A supply of a property or a service may be a qualifying health care supply if it is performed for at least one of the listed purposes, even if it is performed, as well, for other purposes that are not listed.

For more information on qualifying health care supplies, refer to GST/HST Notice 286, Draft GST/HST Policy Statement, Qualifying Health Care Supplies and the Application of Section 1.2 of Part II of Schedule V to the Excise Tax Act to the Supply of Medical Examinations, Reports and Certificates.

ADDITIONAL INFORMATION

You mentioned that the professional fee portion of the OHIP billing is sent by the Corporation to the reading physicians, and that the technical fee portion is retained by the Corporation.

In the absence of documentation relating to this aspect of the relationship between the Corporation and the reading physicians, we provide the following information that may assist you in determining the application of the GST/HST related to the retaining by the Corporation of the technical fee portion.

The Corporation has a group billing number which allows it to submit billings to OHIP on behalf of the reading physicians for all of the medical and diagnostic services rendered to individuals. The reading physicians have provided direction to the MOHLTC to forward all OHIP payments for the supply of the insured diagnostic services to the Corporation directly.

The reading physicians are lawfully entitled to the entire payment for the diagnostic services as stated in section 15 of the Health Insurance Act and can direct the payment to another entity (Footnote 1) . This include the professional fee portion and the technical fee portion. The consideration for the supply of the reading physicians’ services has been paid by OHIP even though the payment of money was directed to the Corporation.

We note that there might be supplies made by the Corporation to the reading physicians as an amount of money, corresponding to the technical fees, is retained by the Corporation. The Corporation provides various health services at its facilities. It requires the reading physicians’ services to provide diagnostic services. In return, the reading physicians assist the Corporation by benefitting of the right to provide their services to the Corporation’s clients and the use of its installation. This could point to a supply made by the Corporation to the reading physicians for a consideration that corresponds to the amount of technical fees.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the rulings given in this letter provided that: none of the issues discussed in the rulings are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The additional information given in this letter is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call Chantal Desrosiers, Manager, directly at 343-552-7297. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at

1-800-959-8287.

Yours truly,

Chantal Desrosiers
Manager
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
[…]

FOOTNOTES

1 RSO 1990, c H.6. Section 16.1 provides that:

16.1 (1) A physician or a practitioner may direct that payments for services performed by the physician or practitioner and to which the physician or practitioner is lawfully entitled may be directed to such person or entity as may be prescribed and in such circumstances and on such conditions as may be prescribed, including such requirements and other matters with respect to directions as may be prescribed.

(2) Repealed.

(3) The entitlement to payment for services performed by a physician or a practitioner is that of the physician or practitioner and not that of the person or entity to which the physician or practitioner has directed that such a payment be made.

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 200481

Dear [Client]:

Subject: GST/HST RULING
[…][Whether zero-rated as basic groceries]

Thank you for your correspondence dated June 13, 2019, concerning the application of GST/HST to [...](Product A), […](Product B), […](Product C), and […](Product D). We apologize for our delay in responding.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

1. […](the Company) is an online retailer.

2. The Company promotes itself as a supplier of gourmet coffees, tea, and dietary supplements.

3. […].

4. We have reviewed the website referenced in your submission, […]

5. The ingredients for the products are as follows:

Product A: […].

Product B: […].

Product C: […].

Product D: […].

6. Marketing for Product A states that it can help […].

7. The packaging of Product A contains a supplemental facts table and directions […].

8. Marketing for Product B represents the product as a premium coffee and states that it can help […].

9. The packaging of Product B contains a nutritional facts table and directions […].

10. Marketing for Product C includes claims that the product can help […].

11. The packaging of Product C contains a supplement facts table and directions […].

12. Marketing for Product D represents the product as a green tea and states that it can help […].

13. Directions on the packaging for Product D advise the following: […].

RULING REQUESTED

You would like to know if supplies of Product A, Product B, Product C and Product D are zero-rated supplies under section 1 of Part III of Schedule VI.

RULING GIVEN

Based on the facts set out above, we rule that supplies of Product A, Product B, Product C, and Product D, are not supplies of basic groceries. Therefore, supplies of these products are not zero-rated under section 1 of Part III of Schedule VI.

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply. Zero-rated supplies (listed in Schedule VI) are subject to the GST/HST at the rate of 0%.

Section 1 of Part III of Schedule VI zero-rates supplies of food or beverages for human consumption (including sweetening agents, seasonings and other ingredients to be mixed with or used in the preparation of such food or beverages), other than supplies included in paragraphs (a) to (r) of that section.

The words “food”, “beverages” and “ingredients” are not defined in the ETA. The Canada Revenue Agency (CRA) considers that a product will be a food or beverage if an average consumer would recognize and purchase the product as a food or beverage in the ordinary course of buying basic groceries. Consumers usually consume food for enjoyment or to allay hunger, while beverages are usually consumed for enjoyment or to quench thirst.

The CRA considers a product to be an ingredient if an average consumer would recognize the product as an ingredient into food or a beverage. Generally, it is the view of the CRA that an average consumer would consider a product to be an ingredient if the product adds to the flavour, texture or appearance of the final product; that is, if it is integral to the final product. Moreover, in order to be regarded as an ingredient to a food or beverage, the final product, in and of itself, would have to be considered to be a food or beverage by the average consumer.

Memorandum 4.3 describes dietary supplements as supplies consumed for their therapeutic or preventative effects, or to achieve specific beneficial effects related to performance or physique. Food and beverages are usually consumed by an average person to sustain or maintain life, to allay hunger or thirst, or for enjoyment. Products commonly referred to as dietary supplements are not considered to be basic groceries and are not within the scope of section 1 of Part III of Schedule VI.

Dietary supplements may be made from natural or synthetic ingredients and include products such as vitamins, minerals, tonics, fibre, protein, amino acids, fatty acids, enzymes, herbal supplements, or compounds derived from plant or animal products. Dietary supplements are available in various forms including, but not limited to, tablet, pill, capsule, powder, liquid, gel, wafer and concentrates.

Product B and Product D both contain the ingredient […], which is a product most commonly promoted for its weight loss properties. The labelling and marketing of the products include claims that the products are consumed for the primary purpose of weight loss or maintenance. More specifically, marketing for Product B includes claims that it helps […]. Marketing for Product D includes claims that it helps […].

Similarly, Product A and Product C contain the active ingredient […], which is characterized as a medicinal ingredient by Health Canada in its Natural Health Products Ingredients Database. Marketing for these products identifies their use […].

Therefore, as Product A, Product B, Product C and Product D are all consumed and marketed primarily for their therapeutic and health benefits, supplies of each of these products are not zero-rated under section 1 of Part III of Schedule VI and would be subject GST/HST at the applicable rate based on the place supply.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling(s) given in this letter provided that: none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-429-1696. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Siraj Patel, CGA, CPA
Senior Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 204903
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of the GST/HST to the supply of […][a Salad Product]

Thank you for your letter dated November 25, 2019 concerning the application of GST/HST to the supply of […][a Salad Product](the Product). We apologize for the delay in responding.

The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

STATEMENT OF FACTS

Our understanding of the facts is as follows:

1. […][Information about the Client].

2. […].

3. […][Information about the Product packaging].

4. The ingredients for the Product are as follows:[…].

5. The Product is packaged in a [#]g plastic bowl which is not canned or vacuum-sealed.

6. The plastic bowl has an inner tray and a small container with […][dressing].

7. The small [dressing] container […] is placed just under the compartment with […][other ingredients].

8. The inner tray has […][several] separate compartments [for ingredients]. […].

9. […]

10. The instruction […] [for preparing the salad are] on the label […].

11. You have indicated that the Product will be sold in the produce section of the store.

RULING REQUESTED

You would like to know if the supply of the Product is zero-rated under section 1 of Part III of Schedule VI.

RULING GIVEN

Based on the facts set out above, we rule that the supply of the Product is not zero-rated under section 1 of Part III of Schedule VI.

EXPLANATION

Generally, in accordance with section 165, every recipient of a taxable supply made in Canada is required to pay GST/HST on the value of the consideration for the supply unless the supply is zero-rated (subject to the GST/HST at the rate of 0%.). A zero-rated supply is a supply that is included in Schedule VI.

Under Part III of Schedule VI, certain supplies of basic groceries are zero-rated. Section 1 of Part III of Schedule VI, zero-rates supplies of food or beverages for human consumption, including sweetening agents, seasonings and other ingredients mixed with or used in the preparation of such food or beverages, other than supplies included in paragraphs (a) to (r) of that section. Paragraph (o.1) of section 1 excludes supplies of salads not canned or vacuum sealed from being zero-rated.

Paragraphs 104 to 109 of GST/HST Memorandum 4.3, Basic Groceries, outline how the GST/HST applies to supplies of salads. Paragraph 105 states:

Salads are considered to include ingredients such as chopped, shredded, diced, sliced, or pureed vegetables, meat, fish, egg, or other food supplied with a dressing and/or seasonings(s), whether or not the dressing is mixed with the other ingredients. A combination of one ingredient mixed with a dressing or seasoning(s) that is sold or represented as a salad is also considered to be a salad. Fruit salads and gelatine salads generally do not need a dressing to be considered a salad.

Paragraph 109 indicates that salad kits are basic groceries and their supply is zero-rated. It states:

A package that contains the ingredients for a salad where the ingredients are not mixed, such as a package containing lettuce, croutons and dressing (i.e., where the ingredients are in separate containers) and that require mixing by the consumer, is not considered to be a salad for purposes of the GST/HST.

Although no one factor is determinative on its own, there are several factors which, when considered together, indicate that the Product is a salad. More specifically, the outer packaging is designed to serve the purpose of being the salad bowl, some of the ingredients are premixed and separation between the various other elements of the salad is to preserve the freshness of the ingredients. In addition, minimal preparation is required as the instructions on the packaging indicate to simply, […]. Therefore, as the Product contains elements that are premixed and it is designed to be ready for immediate consumption, it is our opinion that the product is a salad that is neither canned or vacuum sealed.

In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (905) 429-1696. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Siraj Patel, CGA, CPA
Senior Rulings Officer
Basic Groceries and Recaptured Input Tax Credits Unit
General Operation and Boarder Issues Division
GST/HST Rulings Directorate