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: 139596
Business Number: […]
August 31, 2012
Dear [Client]:
Subject: GST/HST RULING
Tax Status of supplies of […][Orthopaedic] Devices
Thank you for your fax of October 21, 2011, and telephone conversations with Art Blommesteijn and Chantal Desrosiers of our office concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supplies of various medical devices by the […][Organization].
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
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 [organization] is a registrant for GST/HST purposes under Business Number […].
2. The [organization] supplies […] medical devices referred to as […]. These devices are […][Product 1] and […][Product 2].
3. The [organization] supplies [Product 1] and [Product 2] […] to individuals on a written order of a medical practitioner.
4. [Product 1] is […].
5. [Product 1] treatments are […].
6. [Product 1] is a portable device that a patient can use in their own home, at work, or while travelling. This eliminates the need for the patient to visit a clinic or other facility for treatments.
7. [Product 1] is […] for single patient use only, […].
8. [Product 2][…]
9. [Product 2] is a […]
10. [Product 2] devices are cord free and portable; patients can have their treatments independently without the need to attend a hospital or clinic. […].
11. [Product 2] devices are licensed for single patient use only, […]..
RULING REQUESTED
You would like to know if the supplies of [Product 1] and [Product 2] are zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA when the devices are supplied on the written order of a medical practitioner for use by a consumer named in the order.
RULING GIVEN
Based on the facts set out above, we rule that the supplies of [Product 1] and [Product 2] are orthopaedic devices which are zero-rated pursuant to section 23 of Part II of Schedule VI to the ETA when supplied on the written order of a specified professional.
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 remains subject to tax at the rate of 5%, 12%, 13%, or 15% as applicable.
General Information - Part II Schedule VI
Part II of Schedule VI lists medical devices for human use that are zero-rated (taxable at 0%) under the ETA. Some devices are zero-rated in their own right (e.g. supplies of artificial eyes, artificial teeth, hearing aids) while other devices are zero-rated only when supplied under certain conditions (e.g. on the written order of a specified professional for use by a consumer named in the order, or specially designed for use by an individual with a disability).
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 30th Edition (Dorland’s) the term “ortho” means “a combining form meaning straight, normal, or correct”. “Orthotic” is defined by Dorland’s as “serving to protect or to restore or improve function; pertaining to the use of or application of orthoses” 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.
Section 23 does not unconditionally zero-rate orthotic or orthopaedic devices; supplies of these devices must meet either of the two conditions of the section. [Product 1] and [Product 2] […] are sold in standard sizes and would not be considered made to order for an individual. [Product 1] and [Product 2] […] would have to be supplied on the written order of a specified professional or medical practitioner (depending on when the supply was made) for use by an consumer named in the order. Please note that the definition of “consumer” in subsection 123(1) of the ETA excludes individuals who use the property in a commercial activity or in the making of an exempt supply
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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