GST/HST Ruling

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]

Dear [Client]:

Subject: GST/HST RULING
Eligibility to an 83% public service body rebate

Thank you for your letter of [mm/dd/yyyy], concerning [the eligibility of] […](the Corporation) to claim the 83% public service body (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST) under section 259 of the Excise Tax Act (ETA) in respect of its activities. 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 ETA unless otherwise specified.

STATEMENT OF FACTS

We understand that:

1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, and is a charity for purposes of the ETA.

2. The Corporation operates a private, not-for-profit […][long-term care home] (the Facility) in […][Province A](Footnote 1).

3. […][Information about the Facility].

4. […]

5. […][Definitions under the relevant provincial legislation](Footnote 2).

6. […][Information about the residents at the Facility] […]

7. Medical charts and care plans are securely maintained for each resident.

8. The Facility offers residents physician services, resident care services, therapeutic services and environmental services. […]

9. […][Information about the staff at the facility]

10. The Facility has a Medical Director, who is a licensed physician, and 3 to 4 attending physicians affiliated with the Corporation, who provide medical oversight for residents.

11. There is at least one physician on premises 4 to 7 days a week, and one physician on-call 24 hours a day, 7 days a week.

12. […][Information about Physicians]

13. […][Information about health care services]

14. […][Information about the responsibilities of physicians]: […](Footnote 3)[…]

15. […][On-call physician guidelines]

16. […][Nursing care guidelines]

17. The Facility provides wellness programs in which residents are provided with a continuum of therapeutic recreation and activity. Each resident is assessed and specialized recreation/wellness programs are developed since residents may require assistance and/or adaptive devices in order to participate, due to physical limitations or cognitive impairment. […].

18. […][About care services to residents].

19. […](Footnote 4 & 5)

20. The Facility has a therapy team consisting of a full-time licensed physiotherapist, a full-time licensed occupational therapist and a full-time physiotherapy assistant all working from an on-site therapy clinic. […]. The therapists assess all new residents admitted to the Facility and provide ongoing care as needed. The therapy team conducts regular assessments, and team members provide one on one care. These services help residents maintain or restore mobility and independence. All residents are monitored for therapy needs on a regular basis.

21. The physiotherapist on staff uses treatments such as soft tissue mobilization and manipulation; lasers, ultrasound, magnetic fields, electrical currents, and heat and ice to relieve pain and assist in recovery. The physiotherapist also completes assessments and creates individually prescribed exercise programs to help increase mobility. A wide variety of conditions are treated at the Facility, including back and neck pain, posture problems, mobility problems, joint and muscle pain, arthritis, rehabilitation following joint replacement, osteoporosis, difficulty recovering from an illness or from surgery, and stroke or head injury recovery. The physiotherapist provides adaptive devices and programs to maintain the functional status of the residents throughout the Facility.

22. The occupational therapist services are provided onsite at the Facility’s clinic. Services include customizing treatment programs aimed at improving abilities to carry out the activities of daily living, completing a comprehensive evaluation and recommending adaptations to improve abilities and/or reduce the risk of injury, and prescribing and educating residents in the use of adaptive equipment and aids.

23. Other services provided to residents include:

• Music Therapy – […].
• Pastoral care services – The Corporation provides programs for residents in order to meet their spiritual needs, and those of families and staff.
• Dietetics – A full time dietician is employed to assess the nutritional needs of residents.
• Pharmacy services – […]
• Laboratory/Diagnostic Services – […].

24. […][Information about the hours of service provided by various staff]. […], you calculate that each of the [#] residents generally receives approximately 4.5 hours of care per day. You indicate that a physician is also always on premises, thus this calculated amount per day is even higher.

[…].

25. The Facility has an ongoing pandemic preparedness plan and infection prevention and control procedures […]. […] is responsible to report […] during a pandemic situation. The Corporation is also responsible for holding regular staff education sessions on pandemic influenza control.

There is a designated employee assigned to oversee the infection prevention and control program. The program is for the prevention, control and investigation of infectious and communicable diseases. The program is reviewed regularly and revised to reflect leading practices and provincial direction. […]. Aspects currently in place include:

• alcohol hand wash and hand washing facilities are prominently situated throughout the Facility in areas determined by the person designated to oversee infection prevention and control;
• systems are place for detecting and responding to outbreaks of infections with clear reporting mechanisms […];
• provisions for influenza immunization and other immunization or vaccinations are facilitated and recorded, in accordance with provincial requirements and guidelines;
• personal protective equipment which includes proper fitting gloves, long sleeve gowns, goggles and procedure masks will be provided for staff, where appropriate.

26. The Corporation receives funding from the Province in exchange for providing the various services rendered to the residents. […]

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% PSB rebate of the GST and the federal part of the HST as a facility operator.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at a qualifying facility, that is, the Facility.

As such, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by it in the course of operating the Facility for use in making facility supplies, or of making facility supplies.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST and the federal part of the HST paid or payable on its purchases and expenses related to the making of facility supplies, a person must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital Authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority” for GST/HST purposes.

The Corporation does not operate a public hospital and is not designated as a hospital authority.

Therefore, to determine whether there is eligibility for the 83% PSB rebate, it is necessary to determine whether the Corporation is a “facility operator” or an “external supplier”.

Facility Operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as

“an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Corporation is a charity, the supplies it makes to the residents would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V may also apply to exempt supplies of services that the Corporation makes (unless there is interference to the exemption due to sections 1.1 or 1.2 of Part II of Schedule V (Footnote 6)). Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V.

Paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further require that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

In circumstances where chronic care requires the individual to stay overnight at the public hospital or qualifying facility, the definition of “facility supply” in subsection 259(1) provides that the process must require, or reasonably be expected to require, the additional elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply”. That is, a registered nurse must be at the public hospital or qualifying facility at all times when the individual is there; a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, must be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is there; the individual must be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care; and it must not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services.

The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim) was a facility operator operating a qualifying facility. In this decision, the judge made the determination that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility based on the presence of the following elements which indicated Elim was making facility supplies:

• all of the residents had conditions that required “complex care” as that term was defined in a policy manual of the B.C. Ministry of Health Services;
• the residents were extremely dependent on care either by reason of mental or physical impairment, or both;
• residents were under the care of a physician, who was either associated with the facility or had a pre-existing relationship with the resident;
• a tailored care plan was created for each resident, documented and implemented:

• detailed records were kept on the implementation of the care plans,
• medication reviews were required every six months, and
• inter-disciplinary meetings were held annually;

• physicians visited residents frequently (e.g., roughly on a bi-weekly basis);
• physicians were at, or on-call to attend, the facility at all times;
• physicians provided substantial medical care (e.g., addressed medical concerns, participated in medication reviews, attended interdisciplinary meetings);
• registered nurses were at the facility at all times, and nurses were in regular communication with physicians for prescription or advice;
• the facility received funding for 2.8 hours of care per resident per day (the calculation was based on scheduled staffing hours);
• the care provided was of a different type than ordinary assistance with activities of daily living that a more robust individual might require.

After comparing the services and the care provided at the Facility to its residents to the elements described in Elim, we are of the view that facility supplies are provided at the Facility by the Corporation.

As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Corporation would meet this first criterion.

Qualifying Funding

The second criterion that must be met under paragraph 259(2.1)(b) for a facility to be a “qualifying facility” is that an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part.

Subsection 259(2.1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning

“a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

[Province A] is a major source of funding for the operation of the Facility. The Corporation receives funding paid by the Province in exchange for providing the various services rendered to the residents. The Corporation is to provide health services (including accommodation, programs, dietary, goods, social work services, physical therapy, occupational therapy, personal and skilled nursing care). […][Information about the Province A funding].

This criterion is thus satisfied.

Accreditation, licence or other authorization

The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

[…]. The Corporation is licensed to operate […].

Thus the third criterion that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility is satisfied.

Overall summary

To summarize, the Facility meets all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation is entitled to an 83% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses to the extent that it intended to consume, use or supply the property or service in the course of activities engaged in by the Corporation in the course of operating the Facility for use in making facility supplies, or of making facility supplies.

For supplies that the Corporation makes which are not facility supplies, the 83% PSB rebate may also be available if the supplies are “ancillary supplies” or “home medical supplies”.

As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.

Ancillary supplies

Subsection 259(1) defines an “ancillary supply” to mean

“a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.”

Home medical supply

Subsection 259(1) defines a “home medical supply” to mean

“an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be

“an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

Calculation of the PSB rebate

The rules in section 259 of the ETA provide that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST or HST paid on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into [Province A] by the Corporation.

The Corporation’s entitlement to an 83% PSB rebate may be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate, unless subsection 259(14) applies.

Subsection 259(14) provides that:

“For the purposes of this section, if a person incurs all or substantially all of the tax that is included in determining the amount of the non-creditable tax charged in respect of property or a service for a claim period of the person acting in the person's capacity as a hospital authority, a facility operator or an external supplier, the person is deemed to have incurred all of the tax that is included in determining that amount in the course of fulfilling the person's responsibilities as a hospital authority, a facility operator or an external supplier, as the case may be.”

The CRA defines “all or substantially all” to mean 90% or more. Generally, subsection 259(14) means that where the Corporation incurs 90% or more of the GST/HST paid or payable on a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), all of that GST/HST is deemed to have been incurred in that capacity. As such, the Corporation could claim a PSB rebate for that property or service at the rate of 83% for the GST and the federal part of the HST. For example, if the Corporation incurs GST/HST on its utilities, and the Corporation determines it incurs 93% of the GST/HST in its activities as a facility operator for making facility supplies, the Corporation may claim 100% of the GST/HST it pays on the utilities using the 83% PSB rebate rate.

Please note that the wording of subsection 259(14) requires an allocation to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

As a charity for purposes of the GST/HST, the Corporation is eligible to claim a 50% PSB rebate of the GST, and the federal part of the HST, paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Facility for use in making facility supplies, or of making facility supplies.

[…][Information about provincial rebate eligibility]

PSB rebates from previous periods

The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.

Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, new subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, new subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

• The PSB did not claim the rebate in the application for any other claim period;
• The application for the subsequent claim period is filed within two years after
• if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
• if the person is not a registrant, the day that is three months after the last day of the particular claim period;
• The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
• The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

Subsection 259(6.1) does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.

For more information on the calculation of the rebate, please refer to the same GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. This guide is available on our website.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7935. 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,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 […].

2 […]

3 […].

4 […]

5 […].

6 Section 1.1 of Part II of Schedule V 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.”

A “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 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.”

A “qualifying health case 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.”

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: 166303

Dear [Client]:

Subject: GST/HST RULING
Application of GST/HST to supplies of medical marihuana

Thank you for your fax of November 19, 2014, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of medical marihuana. 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

Based on your incoming fax of November 19, 2014, we understand the facts to be:

1. On [mm/dd/yyyy], your physician completed a medical document authorizing you to use marihuana for medical purposes. The physician charged you $[…] for the completion of the medical document.

2. On [mm/dd/yyyy], the Ministry of Health and Long-term Care (Ministry) sent you a cheque in the amount of $[…] as the Ministry concluded that the completion of the medical document to obtain dried marihuana is an insured service under the Ontario Health Insurance Plan as part of the physician assessment that was provided to you on [mm/dd/yyyy].

3. We understand you believe that the medical document completed by your physician required for the purchase of dried marihuana is equivalent to a prescription because it contains exactly the same information as a prescription. Furthermore, you also believe that the Ministry shares your view since the Ministry reimbursed you for the amount you paid your physician for the completion of a medical document.

4. Cannabis (dried marihuana and other cannabis products) is listed in Schedule II of the Controlled Drugs and Substances Act, S.C. 1996, c. 19 (CDSA) and is therefore a controlled substance for purposes of the CDSA. As such, the possession, production, sale, import and export of cannabis are governed by the CDSA and its regulations.

5. Section 56 of the CDSA authorizes the Minister of Health to exempt any person or class of persons or any controlled substance from the application of all or any part of the provisions of the CDSA or its regulations. There are no section 56 exemptions currently in place pertaining to the sale of dried marihuana and other cannabis products by a licensed producer to its clients. (Footnote 1)

6. The following regulations were created under the CDSA to regulate the possession, production, and sale of dried marihuana and other cannabis products:

• Narcotic Control Regulations, CRC, c1041 (NCR);
• Marihuana for Medical Purposes Regulations, SOR/2013-119 from April 1, 2014 to August 23, 2016 (MMPR); and
• Access to Cannabis for Medical Purposes Regulations, SOR/2016-230 from August 24, 2016 to present (ACMPR).

7. The NCR allow for the distribution of narcotics and other controlled substances, including dried marihuana and other cannabis products, by pharmacists, medical practitioners and hospitals in prescribed circumstances and are not applicable to sales of dried marihuana and other cannabis products made to an individual by a licenced producer.

8. A separate regulatory regime under the (former) MMPR and the ACMPR was established to govern the sale of dried marihuana and other cannabis products to a registered client of a licensed producer.

Please note: The relevant legislative provisions of the (former) MMPR and the ACMPR are provided in more detail in Appendix I located at the end of this letter.

9. Dried marihuana and other cannabis products for medical purposes may only be obtained legally from a licensed producer authorized by Health Canada. Under subsection 108(2) of the (former) MMPR and subsection 130(1) of the ACMPR, a client of a licensed producer must provide the licensed producer with a medical document to become a client of a licensed producer and be eligible to purchase dried marihuana or other cannabis products from that licensed producer.

In accordance with subsections 129(1) and (4) of the (former) MMPR and subsections 8(1) and (4) of the ACMPR, the medical document must be completed and signed by a health care practitioner.

A medical document must indicate

(a) the practitioner’s given name, surname, profession, business address and telephone number, facsimile number and email address, if applicable, the province in which the practitioner is authorized to practise their profession and the number assigned by the province to that authorization;

(b) the person’s given name, surname and date of birth;

(c) the address of the location at which the person consulted with the practitioner;

(d) the daily quantity of dried marihuana to be used by the person, expressed in grams;and

(e) the period of use.

RULING REQUESTED

You would like to know whether supplies of medical marihuana are zero-rated when purchased after April 1, 2014.

RULING GIVEN

Based on the facts set out above, we rule that sales of dried marihuana made in accordance with the MMPR between April 1, 2014 and August 23, 2016 are subject to GST/HST as the sales are not zero-rated under Part I of Schedule VI.

In addition, we rule that sales of dried marihuana, fresh marihuana and cannabis oil made in accordance with the ACMPR on or after August 24, 2016 are subject to GST/HST as the sales are not zero-rated under Part I of Schedule VI.

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. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Zero-rated supplies are included in Schedule VI.

Part I of Schedule VI contains provisions that zero-rate a broad range of drugs and substances that are regulated under federal legislation. Sections 2 and 3 of Part I of Schedule VI are relevant in this ruling.

Paragraph 2(d) of Part I of Schedule VI zero-rates

a drug that contains a substance included in the schedule to the Narcotic Control Regulations, other than a drug or mixture of drugs that may, pursuant to the Controlled Drugs and Substances Act or regulations made under that Act, be sold to a consumer with neither a prescription nor an exemption by the Minister of Health in respect of the sale,

but not including a supply of a drug or substance when it is labelled or supplied for agriculture or veterinary use only.

Section 1 of Part I of Schedule VI defines the term “prescription” to mean

a written or verbal order, given to a pharmacist (Footnote 2) by a medical practitioner or authorized individual, directing that a stated amount of a drug or mixture of drugs specified in the order be dispensed for the individual named in the order.

Section 3 of Part I of Schedule VI zero-rates

a supply of a drug when the drug is for human use and is dispensed

(a) by a medical practitioner to an individual for the personal consumption or use of the individual or an individual related thereto; or

(b) on the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription.

Paragraph 2(d) of Part I of Schedule VI

For a sale of dried marihuana or other cannabis product to be zero-rated under paragraph 2(d) of Part I of Schedule VI the (former) MMPR and the ACMPR must require the sale of dried marihuana or other cannabis products to a consumer by a licensed producer to be made on a prescription or an exemption from the Minister of Health. In other words, a registered client must provide their licensed producer with a prescription or an exemption by the Minister of Health for paragraph 2(d) of Part I of Schedule VI to apply.

To obtain dried marihuana and other cannabis products from a licensed producer under the (former) MMPR and ACMPR an individual is required to become a registered client of a licensed producer and thus submit the original of their medical document to that licensed producer. Although under the (former) MMPR and the ACMPR a medical document contains information that may be similar to that found on a prescription, a medical document does not meet the definition of the term “prescription” in section 1 of Part I of Schedule VI.

The definition of prescription in section 1 of Part I of Schedule VI requires a written or verbal order be given to a pharmacist for purposes of dispensing a stated amount of dried marihuana or other cannabis products. There is no legal authority in the (former) MMPR or the ACMPR for a pharmacist to possess, sell, or dispense dried or fresh marihuana or cannabis oil for medical purposes to an individual consumer, regardless of whether or not a physician or nurse practitioner is authorized by its regulatory body to prescribe these products. Therefore, this requirement cannot be met.

In addition, an online or telephone order (Footnote 3) submitted by a client when ordering dried marihuana or other cannabis products from a licensed producer is also not a prescription for GST/HST purposes. It is our view that the online or telephone order is akin to an order form. For the reasons outlined above, the written/verbal order is not a prescription.

Paragraph 2(d) of Part I of Schedule VI also zero--rates sales of dried marihuana sold with an exemption under the CDSA by the Minister of Health. Section 56 of the CDSA exempts a person or class of persons or any controlled substance from the provisions in the CDSA and its regulations. However, there is no exemption granted by the Minister of Health applicable to the sale of dried marihuana and other cannabis products by a licensed producer to a registered client. The (former) MMPR and ACMPR are subordinate legislation promulgated by the Governor in Council on the recommendation of the Minister of Health and as such, do not constitute an exemption granted by the Minister of Health.

As dried marihuana, fresh marihuana, and cannabis oil can be sold to a consumer without a prescription or an exemption from the Minister of Health, sales of these products are not zero-rated under paragraph 2(d) of Part I of Schedule VI.

Section 3 of Part I of Schedule VI

With regards to paragraph 3(b) of Part I of Schedule VI of the ETA, a drug is zero--rated if it is dispensed on the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription. As discussed above, a medical document and a written/verbal order are not a prescription as defined in section 1 of Part I of Schedule VI. Therefore, paragraph 3(b) of Part I of Schedule VI cannot apply to zero--rate sales of dried marihuana or other cannabis products in this circumstance.

There are no other provisions in the ETA to zero--rate supplies of dried marihuana or other cannabis products by a licensed producer to a registered client. Therefore, sales of these products are subject to the GST/HST whether made under the (former) MMPR or under the ACMPR.

Illegal sales of dried marihuana and other cannabis product

Please note, sales of dried marihuana and other cannabis products made outside of the regulatory scheme provided by the (former) MMPR and the ACMPR are also subject to the GST/HST (Footnote 4). This would include sales made by local marihuana dispensaries, compassion clubs and other similar businesses.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7934. 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,

Alison Jones
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

APPENDIX I

The MMPR - April 1, 2014 to August 23, 2016

1. As of April 1, 2014, the MMPR authorize:

• the possession of dried marihuana for medical purposes by individuals who have the support of an authorized health care practitioner;
• the production of dried marihuana by licensed producers; and
• the sale and distribution of dried marihuana by licensed producers and hospitals to individuals who can possess it.

2. Section 1 of the MMPR defines the following terms for purposes of the MMPR:

“client” means a person who is registered as a client with a licensed producer under section 111 (Footnote 5).

“health care practitioner” means a medical practitioner or a nurse practitioner.

“marihuana” means the substance referred to as “Cannabis (marihuana)” in subitem 1(2) of Schedule II to the CDSA.

“medical document” means a medical document referred to in section 129.

“medical practitioner” means a person who

(a) is registered and entitled under the laws of a province to practise medicine in that province; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of those Regulations.

3. Under subsection 3(1) of the MMPR a person listed in subsection 3(2) may possess dried marihuana if the dried marihuana is obtained

(a) in accordance with the MMPR;

(b) in the course of activities performed in connection with the enforcement or administration of any Act or its regulations;

(c) from a person who is exempt under section 56 of the CDSA from the application of subsection 5(1) of the CDSA with respect to the dried marihuana or cannabis; or

(d) in the case referred to in subparagraph 3(2)(a)(iii) of the MMPR, under subsection 65(2.1) of the NCR.

4. Under subsection 3(2) of the MMPR the following persons may possess dried marihuana:

(a) a person who has obtained the dried marihuana for their own medical purposes or for those of another person for whom they are responsible

(i) from a licensed producer, in accordance with a medical document,

(ii) from a health care practitioner in the course of treatment for a medical condition, or

(iii) from a hospital, under subsection 65(2.1) of the NCR;

(b) a person who requires dried marihuana for the practice of their profession as a health care practitioner in the province in which they have that possession; or

(c) a hospital employee, if they possess the dried marihuana for the purposes of and in connection with their employment.

5. Section 12 of the MMPR outlines the limited activities a licensed producer is authorized to engage in that involves dried marihuana. In particular, under subsection 12(4) of the MMPR a licensed producer may

(a) sell or provide dried marihuana to

(i) a client of that producer or an individual who is responsible for the client;

(ii) a hospital employee, if the possession of the dried marihuana is for the purposes of and in connection with their employment; or

(iii) a person to whom an exemption relating to the dried marihuana has been granted under section 56 of the CDSA.

(b) ship dried marihuana to a health care practitioner in the case referred to in subparagraph 108(1)(f)(iii) of the MMPR.

6. Sections 107 to 124 of the MMPR outline the requirements an individual and a licensed producer must meet for an individual to become a client of a licensed producer. Before registering an individual as a client, section 108 of the MMPR requires a licensed producer to obtain from the individual or individual responsible for the individual, an application containing prescribed information including the individual’s name, date of birth, gender, address of residence and mailing address.

Under subsection 108(2) of the MMPR an individual must include with the application the original of their medical document. Under section 129 of the MMPR the medical document provided by a health care practitioner to a person who is under their professional treatment must indicate

(a) the practitioner’s given name, surname, profession, business address and telephone number, facsimile number and email address, if applicable, the province in which the practitioner is authorized to practise their profession and the number assigned by the province to that authorization;

(b) the person’s given name, surname and date of birth;

(c) the address of the location at which the person consulted with the practitioner;

(d) the daily quantity of dried marihuana to be used by the person, expressed in grams; and

(e) the period of use.

7. Subsection 121(1) of the MMPR prohibits a licensed producer from selling or providing dried marihuana to a client or individual responsible for the client unless the licensed producer has first received a written or verbal order from the client or the individual responsible for the client.

The information required on a written order is outlined in subsection 121(2) of the MMPR. This information includes, in part, the client’s name, date of birth, shipping address specified in their registration document and unique identifier, and the quantity and brand name of the dried marihuana being ordered.

Where a licensed producer receives a verbal order from a registered client subsection 121(3) and section 137 of the MMPR require the licensed producer to record the order number, the date the order was received and the information required on the written order under subsection 121(2) of the MMPR.

8. Effective August 24, 2016, the MMPR were repealed.

The ACMPR - August 24, 2016 to present

1. On August 24, 2016, the ACMPR came into force and replaced the MMPR (Footnote 6). The ACMPR authorize:

• the possession of dried or fresh marihuana and cannabis oil for medical purposes by individuals who have the support of an authorized health care practitioner;
• the production, sale and distribution of dried or fresh marihuana, cannabis oil or starting materials (seeds and plants) by licensed producers to individuals who can possess it; and
• the production of limited amounts of cannabis by individuals for their own medical purpose or to designate someone to produce it for them.

2. Section 1 of the ACMPR defines the following terms for purposes of the ACMPR:

“health care practitioner” means, except in sections 123, 124 and 203, a medical practitioner or a nurse practitioner (Footnote 7).

“licensed producer” means the holder of a licence issued under section 35.

“marihuana” means the substance referred to as “Cannabis (marihuana)” in subitem 1(2) of Schedule II to the CDSA.

“medical document” means a medical document referred to in section 8.

“medical practitioner” means a person who

(a) is registered and entitled under the laws of a province to practise medicine in that province; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of the NCR.

“nurse practitioner” means a nurse practitioner as defined in section 1 of the New Classes of Practitioners Regulations who

(a) is permitted to prescribe dried marihuana in the province in which they practise; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of those Regulations.

3. Subsection 17(1) of the ACMPR defines the term “client” to mean a person who is registered as a client with a licensed producer under section 133 (Footnote 8) of the ACMPR.

4. Section 3 of the ACMPR outlines all persons who are authorized to possess dried or other cannabis products. In particular, under subsection 3(1) of the ACMPR a person listed in subsection 3(2) may possess fresh or dried marihuana or cannabis oil and a person listed in subsection 3(3) may possess cannabis if the person has obtained it

(a) in accordance with the ACMPR;

(b) in the course of activities performed in connection with the enforcement or administration of any Act or its regulations;

(c) from a person who is exempt under section 56 of the CDSA from the application of subsection 5(1) of the CDSA with respect to that substance; or

(d) in the case referred to in subparagraph 3(2)(a)(iii) of the ACMPR, under subsection 65(2.1) of the NCR.

5. Under subsection 3(2) of the ACMPR the following persons may possess fresh or dried marihuana or cannabis oil

(a) a person who has obtained the substance for their own medical purposes or for those of another individual for whom they are responsible

(i) from a licensed producer,

(ii) from a health care practitioner in the course of treatment for a medical condition, or

(iii) from a hospital, under subsection 65(2.1) of the NCR;

(b) a person who requires the substance for the practice of their profession as a health care practitioner in the province in which they have that possession; or

(c) a hospital employee, if they possess the substance for the purposes of and in connection with their employment.

6. Under subsection 3(3) of the ACMPR the following persons may possess cannabis:

(a) a person who has obtained cannabis for their own medical purposes by producing it as a registered person;

(b) a person who has obtained cannabis — for their own medical purposes or for those of another individual for whom they are responsible — from a designated person;

(c) a person who requires cannabis for their business as a licensed producer and who possesses it in accordance with section 22 of the ACMPR;

(d) a person who requires cannabis for their business as a licensed dealer;

(e) a person who is employed as an inspector, an analyst, a peace officer, a member of the Royal Canadian Mounted Police or a member of the technical or scientific staff of a department of the Government of Canada or of the government of a province and who possesses the cannabis for the purposes of and in connection with their employment; or

(f) a person who is acting as the agent or mandatary of a person whom they have reasonable grounds to believe is a person referred to in paragraph (e) and who possesses the cannabis for the purpose of assisting that person in the administration or enforcement of any Act or its regulations.

7. Section 22 of the ACMPR outlines the limited activities a licensed producer is authorized to engage in. In particular, under subsection 22(4) of the ACMPR a licensed producer may

(a) sell or provide fresh or dried marihuana or cannabis oil to

(i) a client of that producer or an individual who is responsible for the client,

(ii) a hospital employee, if the possession of the substance is for the purposes of and in connection with their employment, or

(iii) a person to whom an exemption relating to the substance has been granted under section 56 of the CDSA; and

(b) ship fresh or dried marihuana or cannabis oil to a health care practitioner in the case referred to in subparagraph 130(1)(f)(iii) of the ACMPR.

8. Under subsection 22(5) of the ACMPR a licensed producer may sell or provide marihuana plants or seeds to a client who is registered with them on the basis of a registration with the Minister of Health made under Part 2 of the ACMPR or to an individual who is responsible for the client.

9. Sections 129 to 130 of the ACMPR outline the requirements an individual and a licensed producer must meet for an individual to become a client of a licensed producer. Before registering an individual as a client, section 130 of the ACMPR requires a licensed producer to obtain from the individual or individual responsible for the individual an application containing prescribed information including the individual’s name, date of birth, address of residence, and shipping address.

An individual must include with the application the original of their medical document or a copy of their registration certificate issued by the Minister of Health under Part 2 of the ACMPR. Under section 8 of the ACMPR a medical document provided by a health care practitioner to a person who is under their professional treatment must indicate

(a) the practitioner’s given name, surname, profession, business address and telephone number, the province in which they are authorized to practise their profession and the number assigned by the province to that authorization and, if applicable, their facsimile number and email address;

(b) the person’s given name, surname and date of birth;

(c) the address of the location at which the person consulted with the practitioner;

(d) the daily quantity of dried marihuana, expressed in grams, that the practitioner authorizes for the person; and

(e) the period of use.

Under subsection 79(1) of the ACMPR a licensed producer who sells or provides fresh marihuana or cannabis oil under subsection 22(4) of the ACMPR must determine the quantity of the marihuana or oil that is equivalent to one gram of dried marihuana.

10. Sections 174 to 186 of the ACMPR outline the requirements and process an individual is required to undergo if the individual is applying to produce cannabis for their own medical purposes or to have it produced for them by a designated person.

11. Under subsection 143(1) of the ACMPR a licensed producer is prohibited from selling or providing dried or fresh marihuana, cannabis oil or marihuana plants or seeds to a client or individual responsible for the client unless the licensed producer has first received a written or verbal order from the client or individual responsible for that client.

The information required on a written order is outlined in subsection 143(2) of the ACMPR. This information includes, in part, the client’s name, date of birth, shipping address specified in their registration document, and unique identifier. It also includes the name of the substance being ordered and its quantity and brand name.

Where a licensed producer receives a verbal order from a registered client subsection 143(3) and section 155 of the ACMPR require the licensed producer to record the order number, the date the order was received and the information required on the written order under subsection 143(2) of the ACMPR.

FOOTNOTES

1 A section 56 exemption was issued as a result of a Federal Court Order granted on March 21, 2014 in Allard v Canada, 2014 FC 280. Individuals who were previously authorized to possess and/or produce marihuana under the former Marihuana Medical Access Regulations, SOR/2001-227 and who meet the terms of the Federal Court injunction order may continue to do so until the Court orders otherwise.

2 Section 1 of Part I of Schedule VI also defines a pharmacist to mean a person who is entitled under the laws of a province to practise the profession of pharmacy.

3 As required pursuant to subsection 121(1) of the (former) MMPR and subsection 143(1) of the ACMPR.

4 In accordance with the decision of the Federal Court of Appeal in Gerry Hedges v. The Queen 2016 FCA 19.

5 Subsection 111(1) of the MMPR authorizes a licensed producer to register an applicant as a client. Under subsection 111(2) of the MMPR a licensed producer must send the client a registration document and information that will permit the client to use a unique identifier for purposes of ordering dried marihuana.

6 As a result of the ACMPR, provisions and definitions in the FDA, FDR, CDSA and the NCR that previously referenced only dried marihuana were updated to reflect the inclusion of fresh marihuana, cannabis oil, and marihuana seeds and plants.

7 Section 122 of the ACMPR states: In sections 123 and 124, health care practitioner means

(a) a person who is, or was, registered and entitled under the laws of a province to practise medicine in that province; or

(b) a person who is, or was, a nurse practitioner as defined in section 1 of the New Classes of Practitioners Regulations and who is, or was, permitted to prescribe dried marihuana in the province in which they practise or practised.

8 Subsection 133(1) of the ACMPR authorizes a licensed producer to register an applicant as a client. Under subsection 133(2) of the ACMPR a licensed producer must send the client a registration document and information that will permit the client to use a unique identifier for purposes of ordering fresh or dried marihuana, cannabis oil or marihuana plants or seeds.

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: 166865
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Application of GST/HST to supplies of medical cannabis

This letter is in response to a ruling requested by […], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of medical cannabis made by […](the Business). […]. We apologize for the delay in our reply.

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 as follows:

1. The Business is a commercial producer of various strains of dried marihuana and other cannabis products for medical purposes and operates a facility located in […][Province A]. The Business is registered for GST/HST.

2. The Business was licensed by Health Canada on [dd/mm/yyyy] (Footnote 1), […][to cultivate and sell cannabis products]. The Business is listed on Health Canada’s website as a licenced producer.

3. The Business supplies dried marihuana and other cannabis products only to individuals resident in Canada who are registered clients of the Business and who have provided the Business with their original medical document completed by a licensed health care practitioner (Footnote 2) or a copy of their registration certificate issued by the Minister of Health. The medical document and registration certificate are not provided to a pharmacist for purposes of dispensing dried marihuana or other cannabis products.

[…]

4. Cannabis is listed in Schedule II of the Controlled Drugs and Substances Act, S.C. 1996, c. 19 (CDSA) and is therefore a controlled substance for purposes of the CDSA. As such, the possession, production, sale, import and export of cannabis are governed by the CDSA and its regulations.

Under subsection 55(1) of the CDSA the following regulations were created under the CDSA to regulate the possession, production, and sale of dried marihuana and other cannabis products:

• Narcotic Control Regulations, CRC, c1041 (NCR);
• Marihuana for Medical Purposes Regulations - April 1, 2014 to August 23, 2016 (MMPR); and
• Access to Cannabis for Medical Purposes Regulations - August 24, 2016 to present (ACMPR).

5. The NCR allow for the distribution of narcotics and other controlled substances, including dried marihuana and other cannabis products, by pharmacists, medical practitioners and hospitals in prescribed circumstances and are not applicable to sales of dried marihuana and other cannabis products made to an individual by a licenced producer.

A separate regulatory regime under the (former) MMPR and the ACMPR was established to govern the sale of dried marihuana and other cannabis products to a registered client of a licensed producer.

6. Section 56 of the CDSA authorizes the Minister of Health to exempt any person or class of persons or any controlled substance from the application of all or any part of the provisions of the CDSA or its regulations. There are no section 56 exemptions currently in place pertaining to the sale of dried marihuana and other cannabis products by a licensed producer to its clients. (Footnote 3)

April 1, 2014 - August 23, 2016

7. As of April 1, 2014, the MMPR authorize:

• the possession of dried marihuana for medical purposes by individuals who have the support of an authorized health care practitioner;
• the production of dried marihuana by licensed producers; and
• the sale and distribution of dried marihuana by licensed producers and hospitals to individuals who can possess it.

8. Section 1 of the MMPR defines the following terms for purposes of the MMPR:

“client” means a person who is registered as a client with a licensed producer under section 111 (Footnote 4).

“health care practitioner” means a medical practitioner or a nurse practitioner.

“marihuana” means the substance referred to as “Cannabis (marihuana)” in subitem 1(2) of Schedule II to the CDSA.

“medical document” means a medical document referred to in section 129.

“medical practitioner” means a person who

(a) is registered and entitled under the laws of a province to practise medicine in that province; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of those Regulations.

9. Under subsection 3(1) of the MMPR a person listed in subsection 3(2) may possess dried marihuana if the dried marihuana is obtained

(a) in accordance with the MMPR;

(b) in the course of activities performed in connection with the enforcement or administration of any Act or its regulations;

(c) from a person who is exempt under section 56 of the CDSA from the application of subsection 5(1) of the CDSA with respect to the dried marihuana or cannabis; or

(d) in the case referred to in subparagraph 3(2)(a)(iii) of the MMPR, under subsection 65(2.1) of the NCR.

10. Under subsection 3(2) of the MMPR the following persons may possess dried marihuana:

(a) a person who has obtained the dried marihuana for their own medical purposes or for those of another person for whom they are responsible

(i) from a licensed producer, in accordance with a medical document,

(ii) from a health care practitioner in the course of treatment for a medical condition, or

(iii) from a hospital, under subsection 65(2.1) of the NCR;

(b) a person who requires dried marihuana for the practice of their profession as a health care practitioner in the province in which they have that possession; or

(c) a hospital employee, if they possess the dried marihuana for the purposes of and in connection with their employment.

11. Section 12 of the MMPR outlines the limited activities a licensed producer is authorized to engage in that involves dried marihuana. In particular, under subsection 12(4) of the MMPR a licensed producer may

(a) sell or provide dried marihuana to

(i) a client of that producer or an individual who is responsible for the client;

(ii) a hospital employee, if the possession of the dried marihuana is for the purposes of and in connection with their employment; or

(iii) a person to whom an exemption relating to the dried marihuana has been granted under section 56 of the CDSA.

(b) ship dried marihuana to a health care practitioner in the case referred to in subparagraph 108(1)(f)(iii) of the MMPR.

12. Sections 107 to 124 of the MMPR outline the requirements an individual and a licensed producer must meet for an individual to become a client of a licensed producer. Before registering an individual as a client, section 108 of the MMPR requires a licensed producer to obtain from the individual or individual responsible for the individual, an application containing prescribed information including the individual’s name, date of birth, gender, address of residence and mailing address.

Under subsection 108(2) of the MMPR an individual must include with the application the original of their medical document. Under section 129 of the MMPR the medical document provided by a health care practitioner to a person who is under their professional treatment must indicate

(a) the practitioner’s given name, surname, profession, business address and telephone number, facsimile number and email address, if applicable, the province in which the practitioner is authorized to practise their profession and the number assigned by the province to that authorization;

(b) the person’s given name, surname and date of birth;

(c) the address of the location at which the person consulted with the practitioner;

(d) the daily quantity of dried marihuana to be used by the person, expressed in grams; and

(e) the period of use.

13. Subsection 121(1) of the MMPR prohibits a licensed producer from selling or providing dried marihuana to a client or individual responsible for the client unless the licensed producer has first received a written or verbal order from the client or the individual responsible for the client.

The information required on a written order is outlined in subsection 121(2) of the MMPR. This information includes, in part, the client’s name, date of birth, shipping address specified in their registration document and unique identifier, and the quantity and brand name of the dried marihuana being ordered.

Where a licensed producer receives a verbal order from a registered client subsection 121(3) and section 137 of the MMPR require the licensed producer to record the order number, the date the order was received and the information required on the written order under subsection 121(2) of the MMPR.

14. Effective August 24, 2016, the MMPR were repealed.

August 24, 2016 to present

15. On August 24, 2016, the ACMPR came into force and replaced the MMPR (Footnote 5). The ACMPR authorize:

• the possession of dried or fresh marihuana and cannabis oil for medical purposes by individuals who have the support of an authorized health care practitioner;
• the production, sale and distribution of dried or fresh marihuana, cannabis oil or starting materials (seeds and plants) by licensed producers to individuals who can possess it; and
• the production of limited amounts of cannabis by individuals for their own medical purpose or to designate someone to produce it for them.

16. Section 1 of the ACMPR defines the following terms for purposes of the ACMPR:

“health care practitioner” means, except in sections 123, 124 and 203, a medical practitioner or a nurse practitioner (Footnote 6).

“licensed producer” means the holder of a licence issued under section 35.

“marihuana” means the substance referred to as “Cannabis (marihuana)” in subitem 1(2) of Schedule II to the CDSA.

“medical document” means a medical document referred to in section 8.

“medical practitioner” means a person who

(a) is registered and entitled under the laws of a province to practise medicine in that province; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of the NCR.

“nurse practitioner” means a nurse practitioner as defined in section 1 of the New Classes of Practitioners Regulations who

(a) is permitted to prescribe dried marihuana in the province in which they practise; and

(b) is not named in a notice issued under section 59 of the NCR that has not been retracted under section 60 of those Regulations.

17. Subsection 17(1) of the ACMPR defines the term “client” to mean a person who is registered as a client with a licensed producer under section 133 (Footnote 7) of the ACMPR.

18. Section 3 of the ACMPR outlines all persons who are authorized to possess dried or other cannabis products. In particular, under subsection 3(1) of the ACMPR a person listed in subsection 3(2) may possess fresh or dried marihuana or cannabis oil and a person listed in subsection 3(3) may possess cannabis if the person has obtained it

(a) in accordance with the ACMPR;

(b) in the course of activities performed in connection with the enforcement or administration of any Act or its regulations;

(c) from a person who is exempt under section 56 of the CDSA from the application of subsection 5(1) of the CDSA with respect to that substance; or

(d) in the case referred to in subparagraph 3(2)(a)(iii) of the ACMPR, under subsection 65(2.1) of the NCR.

19. Under subsection 3(2) of the ACMPR the following persons may possess fresh or dried marihuana or cannabis oil

(a) a person who has obtained the substance for their own medical purposes or for those of another individual for whom they are responsible

(i) from a licensed producer,

(ii) from a health care practitioner in the course of treatment for a medical condition, or

(iii) from a hospital, under subsection 65(2.1) of the NCR;

(b) a person who requires the substance for the practice of their profession as a health care practitioner in the province in which they have that possession; or

(c) a hospital employee, if they possess the substance for the purposes of and in connection with their employment.

20. Under subsection 3(3) of the ACMPR the following persons may possess cannabis:

(a) a person who has obtained cannabis for their own medical purposes by producing it as a registered person;

(b) a person who has obtained cannabis — for their own medical purposes or for those of another individual for whom they are responsible — from a designated person;

(c) a person who requires cannabis for their business as a licensed producer and who possesses it in accordance with section 22 of the ACMPR;

(d) a person who requires cannabis for their business as a licensed dealer;

(e) a person who is employed as an inspector, an analyst, a peace officer, a member of the Royal Canadian Mounted Police or a member of the technical or scientific staff of a department of the Government of Canada or of the government of a province and who possesses the cannabis for the purposes of and in connection with their employment; or

(f) a person who is acting as the agent or mandatary of a person whom they have reasonable grounds to believe is a person referred to in paragraph (e) and who possesses the cannabis for the purpose of assisting that person in the administration or enforcement of any Act or its regulations.

21. Section 22 of the ACMPR outlines the limited activities a licensed producer is authorized to engage in. In particular, under subsection 22(4) of the ACMPR a licensed producer may

(a) sell or provide fresh or dried marihuana or cannabis oil to

(i) a client of that producer or an individual who is responsible for the client,

(ii) a hospital employee, if the possession of the substance is for the purposes of and in connection with their employment, or

(iii) a person to whom an exemption relating to the substance has been granted under section 56 of the CDSA; and

(b) ship fresh or dried marihuana or cannabis oil to a health care practitioner in the case referred to in subparagraph 130(1)(f)(iii) of the ACMPR.

22. Under subsection 22(5) of the ACMPR a licensed producer may sell or provide marihuana plants or seeds to a client who is registered with them on the basis of a registration with the Minister of Health made under Part 2 of the ACMPR or to an individual who is responsible for the client.

23. Sections 129 to 130 of the ACMPR outline the requirements an individual and a licensed producer must meet for an individual to become a client of a licensed producer. Before registering an individual as a client, section 130 of the ACMPR requires a licensed producer to obtain from the individual or individual responsible for the individual an application containing prescribed information including the individual’s name, date of birth, address of residence, and shipping address.

An individual must include with the application the original of their medical document or a copy of their registration certificate issued by the Minister of Health under Part 2 of the ACMPR. Under section 8 of the ACMPR a medical document provided by a health care practitioner to a person who is under their professional treatment must indicate

(a) the practitioner’s given name, surname, profession, business address and telephone number, the province in which they are authorized to practise their profession and the number assigned by the province to that authorization and, if applicable, their facsimile number and email address;

(b) the person’s given name, surname and date of birth;

(c) the address of the location at which the person consulted with the practitioner;

(d) the daily quantity of dried marihuana, expressed in grams, that the practitioner authorizes for the person; and

(e) the period of use.

Under subsection 79(1) of the ACMPR a licensed producer who sells or provides fresh marihuana or cannabis oil under subsection 22(4) of the ACMPR must determine the quantity of the marihuana or oil that is equivalent to one gram of dried marihuana.

24. Sections 174 to 186 of the ACMPR outline the requirements and process an individual is required to undergo if the individual is applying to produce cannabis for their own medical purposes or to have it produced for them by a designated person.

25. Under subsection 143(1) of the ACMPR a licensed producer is prohibited from selling or providing dried or fresh marihuana, cannabis oil or marihuana plants or seeds to a client or individual responsible for the client unless the licensed producer has first received a written or verbal order from the client or individual responsible for that client.

The information required on a written order is outlined in subsection 143(2) of the ACMPR. This information includes, in part, the client’s name, date of birth, shipping address specified in their registration document, and unique identifier. It also includes the name of the substance being ordered and its quantity and brand name.

Where a licensed producer receives a verbal order from a registered client subsection 143(3) and section 155 of the ACMPR require the licensed producer to record the order number, the date the order was received and the information required on the written order under subsection 143(2) of the ACMPR.

RULING REQUESTED

You would like to know whether supplies of medical cannabis made by the Business are zero-rated under paragraph 2(d) of Part I of Schedule VI.

RULING GIVEN

Based on the facts set out above, we rule that supplies of dried marihuana made by the Business in accordance with the MMPR between April 1, 2014 and August 23, 2016 are subject to GST/HST as the supplies are not zero-rated under Part I of Schedule VI.

In addition, we rule that supplies of dried marihuana, fresh marihuana and cannabis oil made by the Business in accordance with the ACMPR on or after August 24, 2016 are subject to GST/HST as the supplies are not zero-rated under Part I of Schedule VI.

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. Exempt supplies are not subject to the GST/HST and are included in Schedule V. Zero-rated supplies are included in Schedule VI.

Part I of Schedule VI contains provisions that zero-rate a broad range of drugs and substances that are regulated under federal legislation. Sections 2 and 3 of Part I of Schedule VI are relevant in this ruling.

Paragraph 2(d) of Part I of Schedule VI zero-rates

a drug that contains a substance included in the schedule to the Narcotic Control Regulations, other than a drug or mixture of drugs that may, pursuant to the Controlled Drugs and Substances Act or regulations made under that Act, be sold to a consumer with neither a prescription nor an exemption by the Minister of Health in respect of the sale,

but not including a supply of a drug or substance when it is labelled or supplied for agriculture of veterinary use only.

Section 1 of Part I of Schedule VI defines the term “prescription” to mean

a written or verbal order, given to a pharmacist (Footnote 8) by a medical practitioner or authorized individual, directing that a stated amount of a drug or mixture of drugs specified in the order be dispensed for the individual named in the order.

Section 3 of Part I of Schedule VI zero-rates

a supply of a drug when the drug is for human use and is dispensed

(a) by a medical practitioner to an individual for the personal consumption or use of the individual or an individual related thereto; or

(b) on the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription.

Paragraph 2(d) of Part I of Schedule VI

For a sale of dried marihuana or other cannabis product to be zero-rated under paragraph 2(d) of Part I of Schedule VI, the (former) MMPR and the ACMPR must require the sale of dried marihuana or other cannabis products to a consumer by a licensed producer to be made on a prescription or an exemption from the Minister of Health. In other words, a registered client must provide their licensed producer with a prescription or an exemption by the Minister of Health for paragraph 2(d) of Part I of Schedule VI to apply.

To obtain dried marihuana and other cannabis products from a licensed producer under the (former) MMPR and ACMPR an individual is required to become a registered client of a licensed producer and thus submit the original of their medical document to that licensed producer. Although under the (former) MMPR and the ACMPR a medical document contains information that may be similar to that found on a prescription, a medical document does not meet the definition of the term “prescription” in section 1 of Part I of Schedule VI.

The definition of prescription in section 1 of Part I of Schedule VI requires a written or verbal order be given to a pharmacist for purposes of dispensing a stated amount of dried marihuana or other cannabis products. There is no legal authority in the (former) MMPR or the ACMPR for a pharmacist to possess, sell, or dispense dried or fresh marihuana or cannabis oil for medical purposes to an individual consumer, regardless of whether or not a physician or nurse practitioner is authorized by its regulatory body to prescribe these products. Therefore, this requirement cannot be met.

In addition, where a client submits an online or telephone order (Footnote 9) when purchasing dried marihuana or other cannabis products from a licensed producer, it is our view that the online/verbal order is akin to an order form. For the reasons outlined above, the online/verbal order is not a prescription for GST/HST purposes.

Paragraph 2(d) of Part I of Schedule VI also zero-rates sales of dried marihuana sold with an exemption under the CDSA by the Minister of Health. Section 56 of the CDSA exempts a person or class of persons or any controlled substance from the provisions in the CDSA and its regulations. However, there is no exemption granted by the Minister of Health applicable to the sale of dried marihuana and other cannabis products by a licensed producer to a registered client. The (former) MMPR and ACMPR are subordinate legislation promulgated by the Governor in Council on the recommendation of the Minister of Health and as such, do not constitute an exemption granted by the Minister of Health.

As dried marihuana, fresh marihuana, and cannabis oil can be sold to a consumer without a prescription or an exemption from the Minister of Health, sales of these products are not zero-rated under paragraph 2(d) of Part I of Schedule VI.

Section 3 of Part I of Schedule VI

With regard to paragraph 3(b) of Part I of Schedule VI of the ETA, a drug is zero-rated if it is dispensed on the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription. As discussed above, a medical document and a written/verbal order are not a prescription as defined in section 1 of Part I of Schedule VI. Therefore, paragraph 3(b) of Part I of Schedule VI cannot apply to zero-rate sales of dried marihuana or other cannabis products in this circumstance.

There are no other provisions in the ETA to zero-rate supplies of dried marihuana or other cannabis products by a licensed producer to a registered client. Therefore, sales of these products are subject to the GST/HST whether made under the (former) MMPR or under the ACMPR.

ADDITIONAL INFORMATION

Although you did not inquire about the application of GST/HST to supplies of marihuana plants and seeds, we offer the following information for your reference.

Certain supplies of industrial hemp products are zero-rated under section 3.1 of Part IV of Schedule VI when supplied by a producer licensed pursuant to the Industrial Hemp Regulations, SOR/98-156 (IHR) under the CDSA.

The supply of grain or seeds and mature stalks having no leaves, flowers, seeds, or branches, of hemp plants of the genera Cannabis by a licensed producer to a client is zero-rated. In the case of viable grain or seeds the supply is only zero-rated under section 3.1 of Part IV of Schedule VI where the grain or seeds are included in the definition of industrial hemp under the IHR and the supply is made in accordance with the CDSA.

Section 1 of the IHR defines the term “industrial hemp” to mean the plants and plant parts of the genera Cannabis, the leaves and flowering heads of which do not contain more than 0.3% THC w/w, and includes the derivatives of such plants and plant parts. It also includes the derivatives of non-viable cannabis seed.

Marihuana seeds supplied by a licensed producer are not included in the above definition of industrial hemp if they are culled from a marihuana plant which has a THC level above 0.3% THC w/w. Sales of such marihuana seeds and marihuana plants are subject to the GST/HST.

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. The interpretation(s) given in this letter, including any additional information, 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 interpretation(s) or the additional information provided herein.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7934. 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,

Alison Jones
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 Sales of dried marihuana and other cannabis products made by the Business commenced after April 1, 2014.

2 The term “health care practitioner” is defined in section 1 of the Marihuana for Medical Purposes Regulations, SOR/2013-119 (MMPR) and the Access to Cannabis for Medical Purposes Regulations, SOR/2016-230 (ACMPR) to mean a medical practitioner or a nurse practitioner.

3 A section 56 exemption was issued as a result of a Federal Court Order granted on March 21, 2014 in Allard v Canada, 2014 FC 280. Individuals who were previously authorized to possess and/or produce marihuana under the former Marihuana Medical Access Regulations, SOR/2001-227 and who meet the terms of the Federal Court injunction order may continue to do so until the Court orders otherwise.

4 Subsection 111(1) of the MMPR authorizes a licensed producer to register an applicant as a client. Under subsection 111(2) of the MMPR a licensed producer must send the client a registration document and information that will permit the client to use a unique identifier for purposes of ordering dried marihuana.

5 As a result of the ACMPR, provisions and definitions in the FDA, FDR, CDSA and the NCR that previously referenced only dried marihuana were updated to reflect the inclusion of fresh marihuana, cannabis oil, and marihuana seeds and plants.

6 Section 122 of the ACMPR states:

In sections 123 and 124, health care practitioner means

(a) a person who is, or was, registered and entitled under the laws of a province to practise medicine in that province; or
(b) a person who is, or was, a nurse practitioner as defined in section 1 of the New Classes of Practitioners Regulations and who is, or was, permitted to prescribe dried marihuana in the province in which they practise or practised.

7 Subsection 133(1) of the ACMPR authorizes a licensed producer to register an applicant as a client. Under subsection 133(2) of the ACMPR a licensed producer must send the client a registration document and information that will permit the client to use a unique identifier for purposes of ordering fresh or dried marihuana, cannabis oil or marihuana plants or seeds.

8 Section 1 of Part I of Schedule VI also defines a pharmacist to mean a person who is entitled under the laws of a province to practise the profession of pharmacy.

9 As required pursuant to subsection 121(1) of the (former) MMPR and subsection 143(1) of the ACMPR.

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

Case Number: 175073

Dear [Client]:

Subject: GST/HST RULING
Eligibility to an 83% public service body rebate

Thank you for your letter of January 8, 2016 concerning the […] (the Corporation)’s eligibility to claim the 83% public service body (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST), and an 87% PSB rebate of the provincial part of the HST, under section 259 of the Excise Tax Act (ETA) in respect of its activities. 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 ETA unless otherwise specified.

STATEMENT OF FACTS

We understand the facts to be:

1. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, and is a charity for purposes of the ETA.

2. The Corporation operates […](the Facility) and […][other property].

3. The Facility which is located in […][City 1] is a […] long-term care home for seniors, […]. At the Facility, staff takes […][care of seniors with multiple health issues].

4. The Facility’s interdisciplinary professional healthcare team includes physicians, nurses, a physiotherapist and physiotherapist assistant, a dietician, pharmacists, a recreation therapist and social workers.

5. The Corporation holds a Long-Term Care Home Licence, pursuant to the Long-term Care Homes Act, 2007, issued by the Ministry of Health and Long-Term Care (MOHLTC).

6. Individuals wishing to apply for admission to the Facility must contact a Community Care Access Centre (CCAC) for eligibility.

7. All of the Facility’s residents have nursing needs that cannot be met through home care. Publicly-funded community-based services available to a person, and other caregiving, support or companionship arrangements available to the person, are not sufficient, in any combination, to meet the person’s requirements, and this results in their needing to reside in a long-term care facility.

8. Most residents suffer from some form of dementia and usually have complex medical problems. All residents require personal care, registered nursing services on-site at all times, and medication administration.

9. The Corporation provides a range of services to the Facility’s residents to meet their health care needs including, for example, nursing, physiotherapy, music therapy, pastoral care services, occupational therapy and dietetic services.

10. At frequent intervals throughout the day, all residents require assistance with activities of daily living and on-site supervision or on-site monitoring to ensure their safety or well-being.

11. A tailored care plan is created for each resident, documented and implemented. Resident care plans cover aspects such as the resident’s medical history, treatments, therapeutic interventions, dietary needs, and the resident’s requirements regarding the activities of daily living.

12. Medical care includes such activities as the administration of medications, treatment and therapies.

13. All residents are under the care of a physician, who is either associated with the Facility or has a pre-existing relationship with the resident.

14. Physicians visit all residents frequently (e.g., bi-weekly). Physicians are at, or on-call to attend, the Facility at all times. All residents have a physician on-call at all times.

15. Physicians provide substantial medical care (e.g., addressing medical concerns), due to residents requiring such care. Their services consist of such activities as assessing patients, providing physical examinations and making diagnoses, and making treatment decisions.

16. Physicians regularly review and, as necessary adjust the treatment of acute medical conditions, chronic health conditions and medication management of residents.

17. Physicians review resident diets. They also participate in medication reviews for each resident with relevant members of the Facility’s health care team. Reviews are performed quarterly or when there is a change in the status of a resident.

18. Physicians participate on an interdisciplinary health care team and attend interdisciplinary meetings regarding residents. They engage collaboratively with the team, for example, to determine a mutually agreeable approach that enables the development and modification of resident care plans.

19. Physicians discuss the course of resident treatment with nursing staff and with the health care team.

20. Physicians make notes on health records which are used by other registered health care disciplines involved in the residents’ care.

21. The Corporation has an Attending Physician Agreement with physicians. The Agreement indicates, in part, that the physician: […][list of duties]:

Appendix A to the Agreement lists the services for which the physician is responsible: […]

22. The Facility has a Medical Director. The Agreement between the Corporation and the Medical Director indicates that the Medical Director’s duties include, in part, to: […]

23. Nurses ensure individual resident care plans, as prescribed by physicians, are carried out.

24. Registered Nurses are at the Facility at all times, and are in regular communication with physicians to keep physicians up-to-date.

25. Personal support workers and health care aides work at the Facility. They carry out individual resident care plans as prescribed by physicians and nursing staff. Their main work is assisting with the activities of daily living of residents (feeding, bathing, etc.).

26. The CCAC provides additional services, such as occupational therapy, speech pathology and nurse specialists to address complex needs.

27. A report of therapeutic health care services (Footnote 1) indicates […] hours of services being rendered per resident per day.

28. […]

29. […]

30. The Corporation receives funding from the Government of Ontario which is to be used by the Corporation to provide health services (health services include accommodation, programs, dietary services, goods, social work services, physical therapy, occupational therapy, personal care and skilled nursing care). The Service Accountability Agreement that the Corporation currently has with the Central Local Health Integration Network (LHIN) defines “services” to be provided, […]

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% PSB rebate of the GST and the federal part of the HST and, as a person resident in Ontario, an 87% rebate of the provincial part of the HST, as a facility operator.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at a qualifying facility, that is, the Facility.

As such, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged (Footnote 2) in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

In addition, the Corporation, as a facility operator resident only in Ontario, is also eligible to claim an 87% PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in Ontario in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST and the federal part of the HST, and in the case of a person resident in Ontario, an 87% PSB rebate of the provincial part of the HST (hereafter these two rebates will be referred to as the “83% (and 87%) PSB rebate”), paid or payable on its purchases and expenses related to the making of facility supplies, the person must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital Authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister [of National Revenue] as a hospital authority” for GST/HST purposes.

The Corporation does not operate a public hospital and is not designated as a hospital authority.

Therefore, to determine whether there is eligibility for the 83% (and 87%) PSB rebate, it is necessary to determine whether the Corporation is a “facility operator” or an “external supplier”.

Facility Operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as

“an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Corporation is a charity, the supplies it makes to the residents would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V. This section may also apply to exempt supplies of services that the Corporation makes.

Paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further require that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

In circumstances where chronic care requires the individual to stay overnight at the public hospital or qualifying facility, the definition of “facility supply” in subsection 259(1) provides that the process must require, or reasonably be expected to require, the additional elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply”. That is, a registered nurse must be at the public hospital or qualifying facility at all times when the individual is there; a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, must be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is there; the individual must be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care; and it must not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services.

The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim) was a facility operator operating a qualifying facility. In this decision, the judge determined that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility based on the presence of the following elements which indicated Elim to be making facility supplies:

• all of the residents had conditions that required “complex care” as that term was defined in a policy manual of the B.C. Ministry of Health Services;

• the residents were extremely dependent on care either by reason of mental or physical impairment, or both;

• residents were under the care of a physician, who was either associated with the facility or had a pre-existing relationship with the resident;

• a tailored care plan was created for each resident, documented and implemented:

• detailed records were kept on the implementation of the care plans,
• medication reviews were required every six months, and
• inter-disciplinary meetings were held annually;

• physicians visited residents frequently (e.g., roughly on a bi-weekly basis);

• physicians were at, or on-call to attend, the facility at all times;

• physicians provided substantial medical care (e.g., addressed medical concerns, participated in medication reviews, attended interdisciplinary meetings);

• registered nurses were at the facility at all times, and nurses were in regular communication with physicians for prescription or advice;

• the facility received funding for 2.8 hours of care per resident per day (the calculation was based on scheduled staffing hours);

• the care provided was of a different type than ordinary assistance with activities of daily living that a more robust individual might require.

After comparing the services and the care provided at the Facility to its residents to the elements described in Elim, we are of the view that facility supplies are provided at the Facility by the Corporation.

As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Corporation would meet this first criterion.

Qualifying Funding

The second criterion that must be met under paragraph 259(2.1)(b) for a facility to be a “qualifying facility” is that an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning “a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

The Province of Ontario is a major source of funds for the operation. The Corporation receives funding paid by the Province in order to support the provision of the various services rendered to the residents. The Corporation is to provide health services (including accommodation, programs, dietary services, goods, social work services, physical therapy, occupational therapy, personal and skilled nursing care). This criterion is thus satisfied.

Accreditation, licence or other authorization

The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The Corporation has a Long-Term Care Home Licence issued by the MOHLTC pursuant to the Long-Term Care Homes Act, 2007 for the Facility. The Corporation is, therefore, authorized to operate a long-term care home (i.e., the Facility).

Thus the third criterion that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility is satisfied.

Overall summary

To summarize, the Facility meets all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation qualifies for an 83% PSB rebate of the GST and the federal part of the HST and an 87% PSB rebate for the provincial part of the HST for non-creditable tax charged in respect of property and services, to the extent that the property and services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

For supplies that the Corporation makes which are not facility supplies, the 83% (and 87%) PSB rebate may still be available if the supplies are “ancillary supplies” or “home medical supplies”.

As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.

Ancillary supplies

Subsection 259(1) defines an “ancillary supply” to mean

“a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.”

Home medical supply

Subsection 259(1) defines a “home medical supply” to mean

“an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be

“an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

Calculation of the PSB rebate

The rules in section 259 of the ETA provide that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST or HST paid on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into Ontario by, the Corporation.

The Corporation’s entitlement to an 83% (and 87%) PSB rebate may be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate, unless subsection 259(14) applies.

Subsection 259(14) provides that:

“For the purposes of this section, if a person incurs all or substantially all of the tax that is included in determining the amount of the non-creditable tax charged in respect of property or a service for a claim period of the person acting in the person's capacity as a hospital authority, a facility operator or an external supplier, the person is deemed to have incurred all of the tax that is included in determining that amount in the course of fulfilling the person's responsibilities as a hospital authority, a facility operator or an external supplier, as the case may be.”

The CRA defines “all or substantially all” to mean 90% or more. Generally, subsection 259(14) means that where the Corporation incurs 90% or more of the GST/HST for a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), all of that GST/HST is deemed to have been incurred in that capacity. As such, the Corporation could claim a PSB rebate for that property or service at the rate of 83% for the GST and the federal part of the HST and, as a resident only in Ontario, at 87% for the provincial part of the HST. For example, if the Corporation incurs GST/HST on its utilities, and the Corporation determines it incurs 93% of the GST/HST in its activities as a facility operator for making facility supplies, the Corporation may claim 100% of the GST/HST it pays on the utilities using the 83% (and 87%) PSB rebate rates.

Please note that the wording of subsection 259(14) requires an allocation to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

As a charity for purposes of the GST/HST, the Corporation is eligible to claim a 50% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

As the Corporation is only resident in Ontario, it is also eligible for an 82% PSB rebate of the provincial part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

PSB rebates from previous periods

The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.

Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, new subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, new subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

• The PSB did not claim the rebate in the application for any other claim period;
• The application for the subsequent claim period is filed within two years after

• if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
• if the person is not a registrant, the day that is three months after the last day of the particular claim period;

• The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
• The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

Subsection 259(6.1) does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.

For more information on the calculation of the rebate, please refer to the GST/HST guide, RC4034, GST/HST Public Service Bodies' Rebate. This guide is available on our website.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7935. 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,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 “Therapeutic health care services” are those services which alleviate medical concerns or specifically address the special health care needs detailed in resident care plans. Therapeutic health care services time includes that of registered nurses, health care aides, and therapists which are worked according to resident care plans.

2 In general terms, "non-creditable tax charged" means the GST/HST paid or payable on property or services for which the Corporation cannot claim an input tax credit, rebate, refund or remission other than a PSB rebate.

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: 143194
Business Number: […]

Dear [Client]:

Subject: GST/HST RULING
Kinesiology services

Thank you for your letter of February 29, 2012, concerning the application of the goods and services tax (GST)/harmonized sales tax (HST) to kinesiology services. 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 that:

1. The practice of kinesiology is not a regulated health care profession in British Columbia.

2. You are a member of the British Columbia Association of Kinesiologists (the Association), which is a not-for-profit membership association that promotes kinesiology as an integral part of individual health and wellness and which also represents and advocates for its members.

3. The Association has established a scope of practice to which its practicing members voluntarily adhere. Amongst other things, this scope of practice outlines permitted treatments (e.g., assessments, treatments and interventions) as well as restricted activities.

4. You perform kinesiology services (i.e., permitted treatments) in accordance with the Association’s scope of practice. […].

5. You […] provide kinesiology services to […][customers]. Some of the services include stretching and performing range of motion exercises, transferring wheelchair bound individuals to and from standing frames, assisting individuals to walk with walkers, and general strengthening programs.

6. Kinesiology services are not covered under the Medical Services Plan (MSP) of British Columbia.

7. […]

8. […][Information about GST/HST registration].

9. […].

RULING REQUESTED

You would like to know […][whether GST/HST applies to the kinesiology services].

RULING GIVEN

Based on the facts set out above, we rule that:

1) The supply of a kinesiology service […] is taxable;

2) GST/HST is payable […];

3) Supplies of kinesiology services […] are taxable. As a registrant since [mm/dd/yyyy], you are required to collect GST/HST on taxable supplies.

EXPLANATION

Generally, supplies of property and services made in Canada are subject to the GST/HST, pursuant to section 165, unless they are specifically exempt under Schedule V to the ETA.

Part II of Schedule V provides that certain health care services are exempt from GST/HST. For a supply of a property or a service to be exempt from GST/HST under Part II of Schedule V, a specific exempting provision included in that Part must apply to the particular supply and the supply must be a “qualifying health care supply” and not a “cosmetic service supply” as those terms are defined in section 1 of that Part. If not included in Part II of Schedule V, then supplies are generally subject to GST/HST under section 165 at the applicable rate, depending on the province in which a supply is made, unless another exempting provision applies.

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 made on the order of

(a) a medical practitioner or practitioner;
(b) 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
(c) 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 term “prescribed” applies to all the services mentioned in the preamble to that section, and as a result, section 10 of Part II of Schedule V effectively exempts a supply of a prescribed diagnostic service, a prescribed treatment service, or a prescribed other health care service rendered to an individual if made on the order of one of the individuals listed in that section.

Subsection 123(1) defines “prescribed” to mean

(a) in the case of a form or the manner of filing a form, authorized by the Minister,
(b) in the case of the information to be given on a form, specified by the Minister,
(c) in the case of the manner of making or filing an election, authorized by the Minister, and
(d) in any other case, prescribed by regulation or determined in accordance with rules prescribed by regulation.

As a result, the term “prescribed” for purposes of section 10 of Part II of Schedule V does not refer to the type of “prescription” document that one may obtain from a medical or other health professional, but rather to a service prescribed by regulation.

“Prescribed” health care services, which are exempt from GST/HST, are found in the Health Care Services (GST/HST) Regulations made under the ETA. The following services are “prescribed” services:

(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).

As kinesiology services are not listed in the Health Care Services (GST/HST) Regulations above, they are not exempt from GST/HST under section 10 of Part II of Schedule V.

As there are no other exempting provisions that can apply, your supplies of kinesiology services, […] are taxable pursuant to section 165. For […] GST/HST registrants (a GST/HST registrant is a person who is registered for the GST/HST or who is required to be registered), GST/HST applies to the value of the consideration for such supplies made in Canada.

[…]

[…].

As a GST/HST registrant, you are entitled to claim input tax credits (ITCs) for tax payable on acquisitions and importations of property or services to the extent to which the property or services are for consumption, use or supply in the course of your commercial activities. See publication RC4022, entitled General Information for GST/HST Registrants, for more information on these ITCs which you are entitled to claim.

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(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 306-517-0416. 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,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and 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.

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

[Addressee]

Case Number: 115147

Dear [Client]:

Subject: GST/HST RULING
Eligibility for 83% Public Service Bodies (PSB) rebate

Thank you for your letter of [mm/dd/yyyy], concerning the […] (the Facility)'s eligibility to claim the 83% public service body (PSB) rebate of the goods and services tax (GST) and the federal part of the harmonized sales tax (HST) under section 259 of the Excise Tax Act (ETA) in respect of its activities. 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 Facility is owned and operated by […] (the Corporation).

2. […]. The Corporation is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act, and is a charity for purposes of the ETA.

3. The Facility is located in […][Province X].

4. The Facility provides palliative care services.

5. The Facility contains comfortable private rooms in a home-like environment for residents allowing peace, privacy and comfort. Meals are delivered to the rooms daily. There is no fee for accommodation; however, residents are responsible for paying for medications and oxygen.

6. Residents come to the Facility for end-of-life care […].

7. The average length of stay at the Facility is 9 to 14 days.

8. Medical services are provided at the Facility, which has the expertise to care for residents at the end of life, including those with special needs such as […].

9. All services rendered to the Facility’s residents are performed at the Facility.

10. Medical and caregiving staff see to the physical needs of each resident at the Facility by providing expert care 24 hours per day, seven days per week. The Facility assigns a multidisciplinary team to each resident comprised of a physician, nursing staff, care aides, social worker (as needed), chaplain, pharmacist and volunteers.

11. […]. […], the health care services provided at the Facility include medication preparation by Registered Nurses (RNs), charting, participating in rounds, patient/family consultations, and bereavement support.

[…][Facility personnel information]

12. […]. The Facility has [#] physicians (one of whom has the role of Medical Director). Physicians are not employees of the Facility, and bill directly […]([…][the provincial health authority]) for resident care services they perform at the Facility. The physicians come and go as required by resident care needs and by administrative duties such as senior management meetings and rounds. Each physician is required to see a resident at least [#] per week. However, their practice is to visit daily or more often as required.

13. Physicians are on-site daily on rotation and work under the direction of the Medical Director who establishes the rotation and the on-call response schedule. Physicians provide hands-on care daily and write medical orders as medication needs and physical care needs of the residents change. They participate in rounds [#] per week where all [#] residents are discussed and where individualized care plans are established (and/or adapted) with the multi-disciplinary team.

The physicians are responsible for ordering medications and diagnostic tests, reviewing the results and performing minor procedures. There is at least one physician on call 24 hours per day, seven days per week.

14. Physician involvement increases as residents near death, with increased attendance and increased need for patient/family/team interactions. Physicians will often need to be present on a more frequent basis near death, sometimes being called back specifically to provide care.

15. The physicians are considered "primary care physicians". As primary care physicians, they service residents who come to the Facility in situations (90% overall through the years) where the resident’s family physician has not continued to service the resident once the resident has entered the Facility.

Physicians service different numbers of residents at the Facility, which affects the amount of time they spend at the Facility each day. […]

[…]

The physicians have written Facility administrative bylaws to follow, besides the general rules of the Canadian College of Family Physicians and of the Royal College of Physicians and Surgeons. […].

16. Once a resident has been admitted to the Facility, medical care is generally provided by physicians at the Facility, and not at home. Approximately 5% of the residents will improve such that they are able to go home, to the hospital, or in most cases to a long-term care facility.

17. The nursing portion of the Facility care is considered symptom management, including dealing with conditions such as loss of appetite, nausea, weakness, difficulty breathing, bowel and bladder problems and confusion. The Facility is capable of dealing with medically unstable conditions. Nurses are not permitted to administer medication without the order of a physician.

18. Reversible conditions are treated at the Facility. These may include, for example, bladder infections with symptoms distress, and excessive pain. A hospital is needed for acute therapy surgeries (which are very rare), for blood transfusions (which are regular occurrences), and to care for some of the 5% of Facility patients who become well enough to leave the Facility.

19. Facility staff do not perform high-tech procedures such as surgery, angioplasty, chemotherapy, and radiation therapy. Medical interventions have already failed once the individual is at the point of coming to the Facility and so are not performed. Interventions at the Facility include, for example, treating stress and delirium and changing medicines. Pain is treated at the Facility. Procedures that may be performed at bedside are minimal and infrequent, but may include joint injection/aspiration, suturing of wounds. The focus of care is direct patient and family interactions, examination, team discussion, medication prescribing and monitoring.

20. The Facility differs from a hospital with respect to which conditions/needs get treated/addressed. The Facility provides treatment of conditions such as pain, nausea, shortness of breath, anxiety, weakness of muscles, fears of abandonment, spiritual aspects, bowel problems, delirium, appetite and insomnia, whereas hospitals generally deal with diseases and conditions such as diabetes, high blood pressure and heart attacks.

Unmanageable symptoms that the Facility cannot handle would be taken care of at a hospital, either before or after a resident is admitted to the Facility. Uncontrolled pain is not an unmanageable symptom for the Facility.

21. The feeding tube policy at the Facility is generally that the feeding tube will continue if an individual already has a feeding tube at admission, but the staff won't start a new feeding tube if an individual needs one.

22. I.V. hydration is not routinely offered at the Facility, but is offered if fluid is expected to help the patient's comfort.

23. The Position Description for the Medical Director indicates that the roles and responsibilities include: […]

24. The Facility utilizes specialized equipment in order to provide services to its residents. […].

25. The Facility carries on its own activities only. It does not organize nor coordinate the making of supplies by other parties.

26. [The provincial health authority] funds the Facility […]. Specifically, it provides funds for the services of various staff (e.g., Director of Care, nurses). The only other income the Facility receives is from donations and sundry revenues. [The provincial health authority] funding and donations comprise approximately […]% of total revenues.

27. The Facility is a contracted provider and delivers residential hospice care […].

28. The Facility is […]

The Corporation receives […] letter […] in regards to services at the Facility. The letter sets out the […] funding, standards, policies, directives and reporting requirements with respect to the services of the Facility.

29. A current […][Agreement] between [the provincial health authority] and the Corporation, which covers the Facility, indicates […]

[…]

The Agreement indicates funding for the [yyyy-yyyy] year to include for services of Registered Nurses, […].

RULING REQUESTED

You would like to know whether the Corporation is entitled to claim an 83% PSB rebate of the GST and the federal part of the HST as a facility operator.

RULING GIVEN

Based on the facts set out above, we rule that the Corporation is a facility operator making facility supplies at a qualifying facility, that is, the Facility.

As such, the Corporation is eligible to claim an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged (Footnote 1) in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

EXPLANATION

To be eligible for an 83% PSB rebate of the GST and the federal part of the HST paid or payable on its purchases and expenses related to the making of facility supplies, a person must be a “hospital authority”, a “facility operator” or an “external supplier”.

Hospital Authority

A “hospital authority” is defined in subsection 123(1) as “an organization that operates a public hospital and that is designated by the Minister [of National Revenue] as a hospital authority” for GST/HST purposes.

[…]

As the Corporation is not a “hospital authority”, to determine if there is eligibility for the 83% PSB rebate, it is necessary to determine if the Corporation is a “facility operator” or an “external supplier”.

Facility Operator

A “facility operator” is defined in subsection 259(1) as meaning “a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility”.

As the Corporation is a charity, it meets the first requirement of the definition. In order to meet the second requirement, the Corporation must operate a “qualifying facility”.

Subsection 259(2.1) sets out three criteria that must be met for a facility, or part of a facility, other than a public hospital, to be a qualifying facility, for a fiscal year, or any part of a fiscal year, of the operator of the facility or part.

A facility or part of a facility will be considered a qualifying facility if:

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of “facility supply” in subsection 259(1) to “public hospital or qualifying facility” were references to the facility or part;

(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and

(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The requirements contained in (a) to (c) above must be met in order for a particular facility to be a “qualifying facility” for purposes of section 259. A discussion of these requirements follows.

Facility Supply

Subsection 259(1) defines the term “facility supply” as “an exempt supply (other than a prescribed supply) of property or a service in respect of which

(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process

(i) is undertaken in whole or in part at the public hospital or qualifying facility,

(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of

(A) a physician acting in the course of the practise of medicine,

(B) a midwife acting in the course of the practise of midwifery,

(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances, and

(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that

(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,

(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and

(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and

(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

A “physician” is defined in subsection 259(1) as “a person who is entitled under the laws of a province to practise the profession of medicine”.

The definition of “facility supply” is to be applied on a supply-by-supply basis. To be a “facility supply”, the property made available or the service rendered to an individual at the public hospital or qualifying facility must be an exempt supply (other than a prescribed supply). Exempt supplies are listed in Schedule V to the ETA.

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (p) of that section. As the Corporation is a charity, the supplies it makes to the Facility’s residents would generally be exempt under section 1 of Part V.1 of Schedule V.

Section 2 of Part II of Schedule V may also apply to exempt supplies of services that the Corporation makes (unless there is interference to the exemption due to sections 1.1 or 1.2 of Part II of Schedule V (Footnote 2)). Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the institutional health care service is rendered to a patient or resident of the facility. The terms “institutional health care service” and “health care facility” are defined in section 1 of Part II of Schedule V.

Paragraph (a), subparagraphs (a)(i) and (a)(ii), and clause (a)(ii)(A) of the definition of “facility supply” further require that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

It is our understanding that palliative care differs from chronic care. Therefore, it is not necessary for elements referred to in clauses (a)(iii)(A) to (D) of the definition of “facility supply” to be met in order for a supply to qualify as a “facility supply”, where only palliative care is being provided, as in the present case.

The decision of the Tax Court of Canada in Elim Housing Society v The Queen (2013-148(GST)G) addressed the question as to whether Elim Housing Society (Elim) was a facility operator operating a qualifying facility. In this decision, the judge made the determination that Elim was entitled to claim the 83% PSB rebate as a facility operator operating a qualifying facility based on the presence of the following elements which indicated Elim to be making facility supplies:

• all of the residents had conditions that required “complex care” as that term was defined in a policy manual of the B.C. Ministry of Health Services;
• the residents were extremely dependent on care either by reason of mental or physical impairment, or both;
• residents were under the care of a physician, who was either associated with the facility or had a pre-existing relationship with the resident;
• a tailored care plan was created for each resident, documented and implemented:

• detailed records were kept on the implementation of the care plans,
• medication reviews were required every six months, and
• inter-disciplinary meetings were held annually;

• physicians visited residents frequently (e.g., roughly on a bi-weekly basis);
• physicians were at, or on-call to attend, the facility at all times;
• physicians provided substantial medical care (e.g., addressed medical concerns, participated in medication reviews, attended interdisciplinary meetings);
• registered nurses were at the facility at all times, and nurses were in regular communication with physicians for prescription or advice;
• the facility received funding for 2.8 hours of care per resident per day (the calculation was based on scheduled staffing hours);
• the care provided was of a different type than ordinary assistance with activities of daily living that a more robust individual might require.

Even though Elim was providing chronic care that required individuals to stay overnight at a qualifying facility, whereas the Corporation is providing palliative care services at the Facility, relevant elements found in Elim are also found in the Facility. After comparing the services and the care provided at the Facility to the relevant elements described in the Elim decision, we are of the view that facility supplies are provided at the Facility by the Corporation.

As mentioned above, subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility to be considered a qualifying facility for all or part of a fiscal year. The first criterion that must be met, under paragraph 259(2.1)(a), is that the exempt supplies made at the qualifying facility must be facility supplies. The exempt supplies that are facility supplies made by the Facility would meet this first criterion.

Qualifying Funding

The second criterion that must be met under paragraph 259(2.1)(b) for a facility to be a “qualifying facility” is that an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part.

Subsection 259(1) defines “qualifying funding” of the operator of a facility for all or part of a fiscal year of the operator as meaning “a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

The funding provided for the Facility operations by [the provincial health authority] meets the requirements of the definition of “qualifying funding”. This criterion under paragraph 259(2.1)(b) is thus satisfied.

Accreditation, licence or other authorization

The third criterion that must be met under paragraph 259(2.1)(c) for a facility, or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year, or any part of a fiscal year of the operator of the facility, or part, is that an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.

The Facility does not have an accreditation nor a licence that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applying to the Facility. […]

[…]

We consider the third criterion that must be met under paragraph 259(2.1)(c) for a facility to be a qualifying facility to be satisfied.

Overall summary

To summarize, the Facility meets all of the requirements of paragraphs (a) to (c) of the definition of “qualifying facility” in subsection 259(2.1) and, as a result, the Corporation is a facility operator for purposes of section 259. Accordingly, the Corporation is qualifies for an 83% PSB rebate of the GST and the federal part of the HST for non-creditable tax charged in respect of property and services, to the extent that the property and services are for consumption, use or supply in activities engaged in by the Corporation in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

For supplies that are made which are not facility supplies, the 83% PSB rebate may still be available if the supplies are “ancillary supplies” or “home medical supplies”.

As the Corporation is a facility operator, it is not an external supplier, since the definition of “external supplier” in subsection 259(1) excludes a facility operator.

ADDITIONAL INFORMATION

As there is no indication that the Corporation is involved in the provision of ancillary supplies or home medical supplies, we offer the following information for your reference.

Ancillary supplies

Subsection 259(1) defines an “ancillary supply” to mean

“a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.”

Home medical supply

Subsection 259(1) defines a “home medical supply” to mean “an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual’s place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.”

Subsection 259(1) defines “medical funding” of a supplier in respect of a supply to be “an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.”

Calculation of the PSB rebate

The rules in section 259 of the ETA provide that the PSB rebate is calculated and claimed on a claim period by claim period basis. The claim periods of a GST/HST registrant are the same as the reporting periods for its GST/HST returns (i.e., annually, quarterly or monthly). A PSB that is not a GST/HST registrant has two claim periods per fiscal year – the first six months and the last six months of its fiscal year.

A PSB claims its rebate on a property-by-property or service-by-service basis. It is the intended consumption, use or supply of a particular property or service at the relevant time that determines the PSB rebate entitlement for the non-creditable GST or HST paid on that property or service, not the overall activities of the PSB. Generally, the relevant time will be the time the supply was made to, or the property was imported or brought into [Province X] by, the Corporation.

The entitlement to an 83% PSB rebate may be limited and require apportionment where the tax paid or payable is for activities that do not qualify for the rebate, unless subsection 259(14) applies.

Subsection 259(14) provides that:

“For the purposes of this section, if a person incurs all or substantially all of the tax that is included in determining the amount of the non-creditable tax charged in respect of property or a service for a claim period of the person acting in the person's capacity as a hospital authority, a facility operator or an external supplier, the person is deemed to have incurred all of the tax that is included in determining that amount in the course of fulfilling the person's responsibilities as a hospital authority, a facility operator or an external supplier, as the case may be.”

The CRA defines “all or substantially all” to mean 90% or more. Generally, subsection 259(14) means that where the Corporation incurs 90% or more of the GST/HST paid or payable on a property or a service acquired in its capacity as a facility operator (e.g., for use in making facility supplies), all of that GST/HST is deemed to have been incurred in that capacity. As such, the Corporation could claim a PSB rebate for that property or service at the rate of 83% for the GST and the federal part of the HST. For example, if the Corporation incurs GST/HST on its utilities, and the Corporation determines it incurs 93% of the GST/HST in its activities as a facility operator for making facility supplies, the Corporation, may claim 100% of the GST/HST it pays on the utilities using the 83% PSB rebate rate.

Please note that the wording of subsection 259(14) requires an allocation to be performed for each property or service identified in the claim period.

Rebate for purchases that do not qualify for 83% rebate

A[0]s a charity for purposes of the GST/HST, the Corporation is eligible to claim a 50% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses intended for consumption, use or supply in activities engaged in by the Corporation otherwise than in the course of operating the Facility for use in making facility supplies, or in the course of making facility supplies.

PSB rebates from previous periods

The Corporation may find that it has GST/HST that was paid or payable but has not been claimed in a rebate or that it has claimed rebates in respect of certain activities at an incorrect rate. The requirements for claiming such additional rebate amounts are not the same and are described in detail below.

Where a person has made an application for a PSB rebate for a particular claim period and later discovers additional GST/HST that was paid or payable in that claim period but was not claimed, subsection 259(6.1) may apply. Where certain conditions are met, new subsection 259(6.1) allows a PSB to claim a rebate in respect of property or a service for a particular claim period in a rebate application for a subsequent claim period ending after September 8, 2017. If a PSB has not claimed a rebate in respect of property or a service for a particular claim period, new subsection 259(6.1) allows the rebate to be carried forward where the following four conditions are met:

• The PSB did not claim the rebate in the application for any other claim period;
• The application for the subsequent claim period is filed within two years after

• if the person is a registrant, the day on or before which the person is required to file its GST/HST return for the particular claim period, and
• if the person is not a registrant, the day that is three months after the last day of the particular claim period;

• The PSB did not change the claimant type under which it was eligible to claim PSB rebates at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period; and
• The applicable rebate factor(s) did not change at any time from the beginning of the claim period in which the GST/HST was paid or payable to the end of the subsequent claim period.

Subsection 259(6.1) does not apply in situations where a person has claimed a PSB rebate in respect of a property or service and later finds out that it was eligible to claim the rebate at a higher rate. If the Corporation has already claimed a PSB rebate for a claim period and subsequently discovers that the rebate was not claimed at the proper rate, the Corporation must adjust the previously filed rebate application to claim a PSB rebate at the higher rate. The Corporation cannot include the additional rebate amount in the PSB rebate application for a different claim period. For more information on how to adjust a previously filed rebate claim, see "How do you make changes to a rebate application you already filed?" in GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. A reassessment or additional assessment of a rebate claim shall not normally be made more than four years after the day the application for the rebate was filed.

For more information on the calculation of the rebate, please refer to the same GST/HST Guide RC4034, GST/HST Public Service Bodies' Rebate. This guide is available on our website.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-517-0416. 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,

John Ware
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 In general terms, "non-creditable tax charged" means the GST/HST paid or payable on property or services for which the Corporation cannot claim an input tax credit, rebate, refund or remission other than a PSB rebate.

2 Section 1.1 of Part II of Schedule V 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.”

A “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 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.”

A “qualifying health case 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.”

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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 181234
Business Number: […]

Dear [Client]:

Subject:	GST/HST RULING
		Alberta Carbon Levy

Thank you for your [correspondence] of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the Alberta carbon levy paid in respect of the supply of natural gas made by […][the Distributor], a natural gas distributor, to its customers.

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

1. [The Distributor] is a natural gas distributor and is a registrant for purposes of the ETA with the GST/HST registration number […].

2. The Alberta Climate Leadership Act (CLA), which imposes a carbon levy on consumers of various carbon-emitting fuels, became effective January 1, 2017.

3. Subsection 1(1) of the CLA includes the following definitions for purposes of the CLA:

“…

(e) “consumer” means a person that produces or purchases fuel in, or imports fuel into, Alberta

(i) for use by that person,

(ii) for use by another person at the first person’s expense, or

(iii) on behalf of, or as agent for, a principal for use by the principal or by another person at the principal’s expense;

…

(h) “direct remitter” means a recipient as set out in section 25(1);

…

(k) “fuel” means a substance set out in the Table in the Schedule;

…

(u) “natural gas distribution system” means a system, not including a transmission pipeline, by which natural gas is distributed to recipients;

(v) “natural gas distributor” means

(i) a person that measures a recipient’s natural gas consumption on a regular basis for the purpose of billing the recipient directly or providing a retail dealer with the recipient’s billing information, or

(ii) a person prescribed as a natural gas distributor but does not include a recipient that sells or removes natural gas that is subject to the carbon levy pursuant to section 8(3) from a transmission pipeline;

(w) “natural gas services” means the issuing of bills to recipients, collection of amounts owing and responding to customer billing inquiries;

…

(gg) “purchase” means to purchase or otherwise obtain fuel with or without giving consideration;

…

(ii) “recipient” means

(i) a person that purchases fuel,

		…

(xii) a natural gas distributor,

		…

(xix) a person that is required by this Act to pay a carbon levy on fuel used in Alberta…

…

(kk) “registrant” means a person registered under section 27;

…

(mm) “sell” means to sell or otherwise supply fuel with or without receiving consideration;

…

(ss) “vendor” means a person that sells fuel to a consumer;

…”

4. Subsection 3(1) of the CLA states “The purpose of this Act is to provide for a carbon levy on consumers of fuel to be effected through a series of payment and remittance obligations that apply to persons throughout the fuel supply chains.”

5. Section 8 of the CLA states, in part,

“…

(5) Subject to subsections (6) to (9), every recipient shall pay to the Crown a carbon levy on natural gas, at the rate for natural gas set out in the Table (Footnote 1) in the Schedule, at the time the recipient sells, removes or purchases natural gas from a natural gas distribution system.

(6) No carbon levy is payable under subsection (5) if the natural gas is purchased exempt from the levy under section 15.

(7) The amount of the carbon levy payable by a recipient pursuant to subsection (5) must be determined by the natural gas distributor and either

(a) communicated by the natural gas distributor to the retail dealer that provides natural gas services to the recipient at the time other billing information in respect of the recipient is provided to the retail dealer, or

(b) billed by the natural gas distributor to the recipient at the time the recipient is billed for the recipient’s natural gas usage if the natural gas distributor is the entity that provides natural gas services to the recipient.

(8) Subject to the regulations, the retail dealer shall remit to the natural gas distributor at the prescribed time the total amount of carbon levy determined by the natural gas distributor pursuant to subsection (7) and communicated to the retail dealer by the natural gas distributor.

(9) Every natural gas distributor shall remit to the Minister at the prescribed time the total amount of carbon levy determined by the natural gas distributor pursuant to subsection (7) in respect of all recipients.

…

(11) A carbon levy payable pursuant to this section must be determined in accordance with the regulations and must be remitted in accordance with section 25.”

6. Section 25 of the CLA states, in part,

“(1) Subject to the regulations, the following persons are direct remitters

  		…

(j) a natural gas distributor

  		…”

(2) Subject to subsection (4), a direct remitter shall remit the carbon levy payable pursuant to sections 4, 6, 7, 8, 9(2)(b) and (4) and 10 to the Minister at the prescribed times and in the prescribed manner.

(3) Subject to the regulations, every recipient other than a direct remitter shall remit the carbon levy payable pursuant to sections 4, 8 and 9(2)(a) to the person that supplied the recipient with the fuel.

(4) When a direct remitter purchases fuel on which the carbon levy is payable pursuant to sections 4, 8 or 9, the direct remitter shall remit the carbon levy to the person that supplied the direct remitter with the fuel.”

7. Section 79 of the CLA states, in part, “The Lieutenant Governor in Council may make regulations

…

(e) respecting the determination of the amount of carbon levy payable or refundable under this Act;

(f) prescribing the times at which carbon levy must be paid;

(g) respecting the remittance of a carbon levy under this Act, including, without limitation, regulations prescribing the times at which, the manner in which and the persons to whom a remittance must be made;

…”

8. Section 6 of the Climate Leadership Regulations (CLR), made pursuant to section 79 of the CLA, states, in part,

“(3) For the purposes of section 8(1), (3) and (5) of the Act, if a recipient is billed by billing period, the amount of fuel sold, removed or purchased by the recipient during a billing period is the amount of fuel for the purposes of determining the carbon levy payable by the recipient for the billing period.

(4) For the purposes of subsection (3), if the amount of fuel sold, removed or purchased is estimated for the purpose of preparing a recipient’s bill for a billing period, the estimated amount is deemed to be the amount of fuel sold, removed or purchased for the purposes of determining the carbon levy payable by the recipient for the billing period.

(5) For the purposes of subsection (3), if, subsequent to a billing period for which the amount of fuel sold, removed or purchased was estimated, the actual amount of fuel sold, removed or purchased becomes available, the natural gas distributor shall redetermine the carbon levy payable based on actual amounts.

(6) For the purposes of subsection (5), a natural gas distributor shall redetermine the carbon levy payable using

(a) the operating practices of the natural gas distributor that are filed with the Alberta Utilities Commission if applicable, or

(b) in any other case, a method acceptable to the [Alberta Finance] Minister.

(7) The amount of carbon levy that a natural gas distributor must remit to the Minister in respect of a reporting period is the billing cycle amount.”

9. You have informed us that [the Distributor] as a natural gas distributor, is required to charge and collect the Alberta carbon levy on the supply of natural gas sold to its customers.

RULING REQUESTED

You would like to know whether the carbon levy charged by [the Distributor] in respect of the supply of natural gas it makes to its customers is subject to the GST.

RULING GIVEN

Based on the facts set out above, the carbon levy charged by [the Distributor] to its customers in respect of the supply of natural gas is included in the consideration for the taxable supply of natural gas and is, therefore, subject to the GST.

EXPLANATION

Section 165 of the ETA imposes GST/HST on taxable supplies made in Canada, calculated at the applicable rate, on the value of the consideration paid or payable for the supply, except where the supply is a zero-rated supply. Subsection 123(1) of the ETA defines “consideration” to include “any amount that is payable for a supply by operation of law.”

Pursuant to paragraph 154(2)(b) of the ETA, for purposes of the GST/HST, the consideration for a supply of a property or a service includes “any provincial levy that is payable by the recipient, or payable or collectible by the supplier, in respect of that supply or in respect of the consumption or use of the property or service, other than a prescribed provincial levy that is payable by the recipient.” A “provincial levy” is defined to mean “a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply, consumption or use of property or a service.” A prescribed provincial levy is a levy prescribed in the Taxes, Duties and Fees (GST/HST) Regulations.

The Alberta carbon levy is imposed under the CLA, an Act of the Alberta legislature, in respect of the supply, consumption or use of fuel, in this case natural gas. Therefore, the carbon levy is a “provincial levy” as defined in section 154 of the ETA. As the carbon levy is imposed in respect of the supply of natural gas, is payable by [the Distributor]’s customers as recipients (for purposes of the ETA) of the supply of natural gas, is collectible by [the Distributor] as the supplier (for purposes of the ETA) of the supply of natural gas, and is not a prescribed provincial levy for purposes of section 154 of the ETA, the consideration for the supply of natural gas made by [the Distributor] will include the carbon levy. As the supply of natural gas made by a gas distributor in Alberta to its customers in Alberta is a taxable supply, the consideration payable for this supply (which includes the carbon levy) is subject to the GST.

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(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 613-670-7938. 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,

Brent Fleming
Government Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTES

1 The Table in the Schedule provides that the carbon levy rate for natural gas is $1.011 /GJ for 2017 and $1.517 /GJ for 2018 and subsequent years.

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: 181483

Dear [Client]:

Subject: GST/HST RULING
Ability to file a GST/HST new housing rebate

Thank you for your fax concerning your ability to file a goods and services tax/harmonized sales tax (GST/HST) new housing rebate for owner-built houses. We apologize for the delay in responding to you.

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.

FACTS

Based on your fax and your telephone conversations with our colleagues in GST/HST Rulings ([…][Regional Office]), our understanding of the facts is as follows:

1. You are planning to engage another person, who is registered for GST/HST purposes, to construct a new house which you will use as your primary place of residence.

2. You will be the first individuals to occupy the house after the construction is begun.

3. You estimate that the fair market value of the house (together with the land subjacent to the house, and the land immediately contiguous to the house that is reasonably necessary for the use and enjoyment of the house as a place of residence for you) at the time the construction is substantially completed will be $[…][< $450,000].

4. The house will be constructed on land you purchased [#] years ago, which is located [in] […][location X, Province X].

5. [Location X] is an unorganized territory, meaning there is no municipal authority there to issue building permits for the construction of new houses. Consequently, you will be unable to obtain a building permit for the construction of your new house.

RULING REQUESTED

In order to claim a GST/HST new housing rebate for owner-built houses, you must complete Form GST191, GST/HST New Housing Rebate Application for Owner-Built Houses, and Form GST191-WS, Construction Summary Worksheet, and file the forms with the Canada Revenue Agency (CRA). Generally, Form GST191-WS requires you to provide the building permit number, but given that your new house will be located in an unorganized territory, you will be unable to provide that information.

Consequently, you would like to know if you will be able to file for a GST/HST new housing rebate for owner-built houses, even though you will be unable to obtain a building permit for the construction of your house.

RULING GIVEN

Based on the facts set out above, we rule that you will not be prevented from filing a GST/HST new housing rebate for owner-built houses because you are unable to obtain a building permit for the construction of your house.

Please note that you must meet all of the eligibility requirements set out in the ETA, as well as the deadline for filing the rebate application before the CRA can pay you the GST/HST new housing rebate for owner-built houses. For more information on the eligibility requirements for the rebate or for general information regarding the rebate, please refer to Guide RC4028, GST/HST New Housing Rebate, which is available on the CRA’s website.

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 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 613-670-0613. 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,

Mathieu Purney
Real Property Unit
Financial Institutions and Real Property Division
Excise and 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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 182121
Business number: […]

Dear [Client]:

Subject:	GST/HST RULING
		The impact of the Ontario's 8% electricity rebate on ITCs 

Thank you for your fax of January 30, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of electricity in Ontario. Specifically, you would like to know how the Ontario 8% electricity rebate program impacts on input tax credit (ITC) eligibility.

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 following:

1. The Ontario government passed legislation, the Ontario Rebate for Electricity Consumers Act, 2016 (Ontario Rebate Act), on November 2, 2016.

2. The Ontario Rebate Act provides for the financial assistance to certain Ontario electricity recipients in respect of charges for electricity.

3. Recipients receive the financial assistance by means of an 8% reduction in the amount payable for electricity.

4. The 8% rebate amount is shown as a separate line item that reduces the total amount payable for electricity after the HST has been calculated and applied.

RULING REQUESTED

You would like to know if the rebate impacts the claiming of ITCs.

RULING GIVEN

Based on the facts set out above, we rule that the value of ITCs that may be claimed are not reduced or affected by the receipt of the Ontario rebate in respect of electricity charges.

EXPLANATION

Pursuant to subsection 165(1), every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (Ontario 8%) on the value of the consideration for the supply.

Generally, under section 169 of the ETA, where a person acquires or imports a property or service or brings it into a participating province during a reporting period of the person during which the person is a registrant and the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, the person will be eligible to claim an ITC in respect of the tax to the extent that the property or service is acquired, imported or brought in for consumption, use or supply in the course of the person's commercial activities.

The Ontario rebate is financial assistance provided by the province to eligible recipients of electricity and serves to reduce the total amount payable by the recipients. The rebate is not a reduction in consideration for the supply of electricity, nor is it a reduction to the HST payable in respect of the supply of electricity.  The Ontario rebate does not alter the value of the ITC that is otherwise claimable by a registrant.

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(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 905-721-5081. 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,

Peter Pushkarna
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and 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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 182286

Dear [Client]:

Subject: GST/HST RULING
The impact of the Ontario's 8% electricity rebate on ITCs and PSB rebates

Thank you for your letter of February 6, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of electricity in Ontario. Specifically, you would like to know how Ontario’s 8% electricity rebate program impacts on the claiming of input tax credits (ITCs), and public service bodies’ (PSB) rebates.

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 following:

1. The Ontario government passed legislation, the Ontario Rebate for Electricity Consumers Act, 2016 (Ontario Rebate Act), on November 2, 2016.

2. The Ontario Rebate Act provides for the financial assistance to certain Ontario electricity recipients in respect of charges for electricity.

3. Recipients receive the financial assistance by means of an 8% reduction in the amount payable for electricity.

4. The 8% rebate amount is shown as a separate line item that reduces the total amount payable for electricity after the HST has been calculated and applied.

RULING REQUESTED

You would like to know if the Ontario electricity rebate impacts on claiming ITCs, and PSB rebates.

RULING GIVEN

Based on the facts set out above, we rule that the Ontario’s 8% electricity rebate has no impact on claiming ITCs or the PSB rebates of the provincial part of the HST.

EXPLANATION

Pursuant to subsection 165(1), every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (Ontario 8%) on the value of the consideration for the supply.

Generally, under section 169 of the ETA, where a person acquires or imports a property or service or brings it into a participating province during a reporting period of the person during which the person is a registrant and the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, the person will be eligible to claim an ITC in respect of the tax to the extent that the property or service is acquired, imported or brought in for consumption, use or supply in the course of the person's commercial activities.

Certain PSBs are eligible to claim a PSB rebate of a percentage of the GST and the federal part of the HST paid or payable on eligible purchases and expenses. A PSB resident in Ontario may also be eligible to claim a rebate of the provincial part of the HST. A PSB is eligible for a PSB rebate if it is a charity, a qualifying non-profit organization or a selected public service body on the last day of a claim period or on the last day of the fiscal year that includes that claim period.

The PSB rebate calculation is based on the PSB's “non-creditable tax charged” for the claim period. Non-creditable tax charged for a claim period is generally equal to the total GST/HST that became payable during the claim period or that was paid during the claim period without having become payable, minus the following amounts:

• any input tax credits the PSB claimed or is entitled to claim for any of that GST/HST;
• any rebate, refund, or remission of any of that GST/HST that it is reasonable to expect the PSB received or is entitled to receive under any other section of the ETA or under any other Act of Parliament;
• any amount of that GST/HST that is refunded, credited, or adjusted in the PSB's favour and for which it has either received a credit note from the supplier or has issued a debit note to the supplier.

The Ontario rebate is financial assistance provided by the province to eligible recipients of electricity and serves to reduce the total amount payable by the recipients. The rebate is not a reduction in consideration for the supply of electricity, nor is it a reduction to the HST payable in respect of the supply of electricity. The Ontario rebate does not alter the value of the ITC that is claimable by a registrant who uses the electricity consumed in its commercial activities.

Furthermore, the Ontario rebate does not impact on the calculation of the non-creditable HST charged in respect of the electricity for the claim period, and therefore does not affect the amount of the PSB rebate.

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(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 905-721-5084. 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,

Peter Pushkarna
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and 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.

Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5

[Addressee]

Case Number: 182758

Dear [Client]:

Subject: GST/HST RULING
The impact of the Ontario's 8% electricity rebate on ITCs and PSB rebates

Thank you for your letter of February 21, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of electricity in Ontario. Specifically, you would like to know how Ontario’s 8% electricity rebate program impacts on the claiming of input tax credits (ITCs), and public service bodies’ (PSB) rebates.

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 following:

1. The Ontario government passed legislation, the Ontario Rebate for Electricity Consumers Act, 2016 (Ontario Rebate Act), on November 2, 2016.

2. The Ontario Rebate Act provides for the financial assistance to certain Ontario electricity recipients in respect of charges for electricity.

3. Recipients receive the financial assistance by means of an 8% reduction in the amount payable for electricity.

4. The 8% rebate amount is shown as a separate line item that reduces the total amount payable for electricity after the HST has been calculated and applied.

RULING REQUESTED

You would like to know if the Ontario electricity rebate impacts on claiming ITCs, and PSB rebates.

RULING GIVEN

Based on the facts set out above, we rule that the Ontario’s 8% electricity rebate has no impact on claiming ITCs or the PSB rebates of the provincial part of the HST.

EXPLANATION

Pursuant to subsection 165(1), every recipient of a taxable supply made in Canada shall pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply. Pursuant to subsection 165(2), every recipient of a taxable supply made in a participating province shall pay in addition to the tax imposed by subsection 165(1), tax in respect of the supply calculated at the rate of tax for that province (Ontario 8%) on the value of the consideration for the supply.

Generally, under section 169 of the ETA, where a person acquires or imports a property or service or brings it into a participating province during a reporting period of the person during which the person is a registrant and the GST/HST in respect of the property or service becomes payable by the person or is paid by the person without having become payable, the person will be eligible to claim an ITC in respect of the tax to the extent that the property or service is acquired, imported or brought in for consumption, use or supply in the course of the person's commercial activities.

Certain PSBs are eligible to claim a PSB rebate of a percentage of the GST and the federal part of the HST paid or payable on eligible purchases and expenses. A PSB resident in Ontario may also be eligible to claim a rebate of the provincial part of the HST. A PSB is eligible for a PSB rebate if it is a charity, a qualifying non-profit organization or a selected public service body on the last day of a claim period or on the last day of the fiscal year that includes that claim period.

The PSB rebate calculation is based on the PSB's “non-creditable tax charged” for the claim period. Non-creditable tax charged for a claim period is generally equal to the total GST/HST that became payable during the claim period or that was paid during the claim period without having become payable, minus the following amounts:

• any input tax credits the PSB claimed or is entitled to claim for any of that GST/HST;
• any rebate, refund, or remission of any of that GST/HST that it is reasonable to expect the PSB received or is entitled to receive under any other section of the ETA or under any other Act of Parliament;
• any amount of that GST/HST that is refunded, credited, or adjusted in the PSB's favour and for which it has either received a credit note from the supplier or has issued a debit note to the supplier.

The Ontario rebate is financial assistance provided by the province to eligible recipients of electricity and serves to reduce the total amount payable by the recipients. The rebate is not a reduction in consideration for the supply of electricity, nor is it a reduction to the HST payable in respect of the supply of electricity. The Ontario rebate does not alter the value of the ITC that is claimable by a registrant who uses the electricity consumed in its commercial activities.

Furthermore, the Ontario rebate does not impact on the calculation of the non-creditable HST charged in respect of the electricity for the claim period, and therefore does not affect the amount of the PSB rebate.

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(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 905-721-5084. 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,

Peter Pushkarna
Basic Groceries and Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate