Words and Phrases - "drug"

The taxpayer sold anesthetic solutions containing epinephrine to dentists, and (notwithstanding an adverse Technical Interpretation letter received by its consultant) did not charge GST on the basis of the zero-rating in Sched. VI, Pt. I, s. 2(e) of any of the listed drugs including “epinephrine and its salts.” The epinephrine had no anesthetic effect and instead acted as a vasopressor (constriction of blood vessels) to prolong the duration of the local anesthetic.

In confirming that the supplies were not zero-rated, Favreau J first stated (at paras 45-47):

As stated in the Finances Technical Notes (April 2017 and April 2012), paragraph 2(e) of Part I of Schedule VI of the ETA enumerates a list of non‑prescription drugs used to treat life-threatening conditions that are zero-rated at all levels of production and distribution. …

There is no doubt in my mind that the epinephrine and its salts and the anesthetic solutions containing epinephrine supplied by the appellant come within the definition of the term “drug” as defined under the Canadian Food and Drugs Act…

However, drugs which have epinephrine as their sole active ingredient are different from those that have epinephrine combined with another active ingredient, such as the anesthetics in issue.

He concluded (at paras 56 -58):

The anesthetics in issue supplied by the appellant are not designed to serve as an emergency relief for patients suffering from major death threatening conditions as required for being listed in paragraph (2)(e) of Part I of Schedule VI of the ETA.

The Legislator did not use on purpose in paragraph 2(e) the terms “mixture of drugs” as he did in paragraphs 2(b) and 2(d) of Part I of Schedule VI of the ETA.

In my view, by allowing epinephrine or any other drug listed in paragraph 2(e) to be mixed with other substances and to characterize this type of mixture with a zero-rating, would be contrary to the policy established by the Department of Finance.