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]
Number: 139590
Business Number: [...]
June 21, 2013
Dear [Client]:
Subject: GST/HST RULING
Supply of [...] [Clothing specially designed for use by an Individual with a Disability] [-] [the Products]
Thank you for your fax of October 18, 2011, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of [...] ([...] [the Product]) [...].
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Based on the information provided we understand the following:
1. [...] (the "Corporation") is a company located in [...] [Participating Province X] [...] that is supplying [the Products].
2. The Corporation is registered for GST/HST purposes.
3. [The Products] are [...] made from [...] [describes product design characteristics and function]
4. The Corporation supplies [the Products] to individuals, health care facilities, health regions in other provinces and retailers. The company has supplied the products to individuals [...] who have presented a prescription from a medical doctor, registered nurse, occupational therapist or physiotherapist.
5. Individuals most likely to use [the Products] are individuals with [...][describes medical conditions].
6. The information provided indicates that the Corporation supplies the following [...] [types] of [the Product]: [...]
7. [The Product] [types] contain [...] [raw materials and characteristics]. [The Product] [types] [...] [details of special design characteristics].
8. The various [Product] [types] have [...] [more Product design characteristics]
Ruling Requested
You would like to know if the Corporation's supplies of [the Products] are zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA.
Ruling Given
Based on the facts set out above, we rule that supplies of [the Products] are not zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA.
We also rule that supplies of [the Products] are zero-rated supplies of clothing specially designed for use by an individual with a disability pursuant to section 36 of Part II of Schedule VI to the ETA when they are supplied on the written order of a specified professional for use by a consumer named in the order.
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
Generally all supplies of goods and services made in Canada are subject to the GST/HST unless specifically relieved under the ETA. There are exceptions for medical devices that are specifically identified in Part II of Schedule VI as being zero-rated; i.e., the tax applies at the rate of 0%. If a medical device is not included in Part II of Schedule VI, then the supply of the medical device generally remains subject to tax at the rate of 5%, 13%, 14%, or 15% as applicable.
Section 23 of Part II of Schedule VI
Section 23 of Part II of Schedule VI zero-rates a "supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a specified professional for use by a consumer named in the order."
For purposes of Part II of Schedule VI, including section 23, the term "specified professional" means a person who is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy; or a registered nurse.
For supplies made before March 30, 2012, section 23 read "A supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a medical practitioner for use by a consumer named in the order.
The term "medical practitioner" was defined in section 1 of Part II of Schedule VI as a person who is entitled under the laws of a province to practise the profession of medicine.
For an orthotic or orthopaedic device to be zero-rated pursuant to section 23 it would have to either be:
i. made to order for an individual, or
ii. supplied on the written order of a specified professional, or a medical practitioner for supplies made before March 30, 2012, for use by a consumer named in the order.
The terms "orthotic" and "orthopaedic" are not defined in the ETA; therefore, we can consider their common or ordinary meaning. According to Dorland's Illustrated Medical Dictionary 32nd Edition (Dorland's) the term "ortho" means "a combining form meaning straight, normal, or correct". "Orthotics" is defined by Dorland's as "the field of knowledge relating to orthoses and their use" where "orthoses" is "an orthopedic appliance or apparatus used to support, align, prevent, or correct deformities or to improve the function of movable parts of the body".
Dorland's defines the term "orthopedic" (the alternate spelling of the word "orthopaedic") to mean "pertaining to the correction of deformities of the musculoskeletal system; pertaining to orthopedics". "Orthopedics" is defined by Dorland's to be "that branch of surgery which is specially concerned with the preservation and restoration of the function of the skeletal system, its articulations, and associated structures".
These common or ordinary meanings of the terms "orthotic" and "orthopedic" suggest that orthotic or orthopedic devices are those devices that are designed to brace, support or align joints, muscles or skeletal parts. In other words, orthotic and orthopedic devices are concerned with the musculoskeletal system, and are used to correct, support or maintain weak or ineffective functions of movable body parts. A device may properly be said to be "orthopedic" where it is directly used to remedy a defect in a patient's musculoskeletal system.
[The Products] [...] do not correct, support or maintain weak or ineffective functions of movable body parts and do not directly remedy a defect in a patient's musculoskeletal system. Therefore, [the Products] would not be considered to be orthotic or orthopaedic devices for purposes of section 23 of Part II of Schedule VI to the ETA.
Section 36 of Part II of Schedule VI
Section 36 of Part II of Schedule VI zero-rates a "supply of clothing that is specially designed for use by an individual with a disability if the clothing is supplied on the written order of a specified professional for use by a consumer named in the order."
Section 1 of Part II of Schedule VI defines "specified professional" as a person that is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy, or a registered nurse.
The phrase "specially designed" attaches to the type or category of clothing. For purposes of section 36, it is the purpose and the features of the clothing that must be examined to determine if this section applies to the particular type or category of clothing. For example, burn pressure garments are specially designed for individuals with burns. Clothing that is custom made for a particular individual is not equated with clothing that is specially designed for an individual with a disability.
For purposes of the GST/HST the CRA considers the term "disability" to be a long-term impairment lasting at least 12 months that restricts an individual in carrying out his or her activities of daily living. The individual's disability may be either congenital, a result of injury, from a neuromuscular disorder such as Muscular Dystrophy or Multiple Sclerosis, or may result from conditions such as Cerebral Palsy, paraplegia, amputation, pulmonary disease, heart disease, arthritis, diabetes, and back disorders. An individual with a disability does not include an elderly or frail person who is otherwise able-bodied, or any person who is only temporarily disabled or incapacitated. For example, an individual with temporary difficulty in walking resulting from a broken limb or surgery is not considered to be an individual with a disability.
A good is "specially designed" for use by an individual if it is designed to compensate for or alleviate limitations or conditions flowing from an individual's disability. The specially designed features must be significant and make the good recognizably different from similar goods without the specially designed features. [The Products] are designed to compensate for limitations for individuals [with] [...][describes medical conditions and product functions]
Supplies made before March 30, 2012
For supplies of clothing made before March 30, 2012, section 36 read "a supply of clothing that is specially designed for use by an individual with a disability when the clothing is supplied on the written order of a medical practitioner for use by a consumer named in the order".
The term "medical practitioner" was defined in section 1 of Part II of Schedule VI as a person who is entitled under the laws of a province to practise the profession of medicine. Therefore, only a supply of clothing that is specially designed for use by an individual with a disability that is supplied on the written order of a medical practitioner would be zero-rated before March 30, 2012.
In conclusion, supplies of [the Products] are zero-rated pursuant to section 36 of Part II of Schedule VI when they are supplied on the written order of a specified professional. Supplies not made on the order of a specified professional, such as supplies made to retailers or bulk supplies made to a long-term care facility, would be subject to tax at the rate of 5%, 13%, 14%, or 15% as applicable.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4395. 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,
Art Blommesteijn
Health Care Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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