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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 130587
Business Number: [...]
June 28, 2011
Dear [Client]:
Subject:
GST/HST RULING
Breast Implant Products Used in Surgical Procedures
Thank you for your facsimile sent November 25, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to breast implant products sold by [...] (the Corporation).
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 your facsimile, we understand the following:
1. The Corporation sells breast implant products to hospitals and physicians who are plastic surgeons as well as intermediaries such as regional distributors who may also be selling these products to hospitals and plastic surgeons.
2. The products are marketed under the brand [...] and are used in both reconstructive surgeries and augmentation procedures.
3. According to the Website for [...] there are two types of products in question: gel-filled and saline-filled breast implants. Either may be used for breast augmentation in a cosmetic surgical procedure or for breast reconstruction in a reconstructive surgical procedure.
4. In addition, [...] manufactures adjustable breast implants, also referred to as tissue expanders that allow postoperative adjustments; i.e., they allow the physician to adjust the size of the breast implant for up to six months after breast surgery. (reference: [...])
5. Hospitals, plastic surgeons and distributors purchase the breast implant products for use in reconstructive surgical procedures as well as for use in cosmetic surgical procedures.
6. You advised that it is your understanding that breast implant products used in reconstructive surgery are zero-rated (taxable at the rate of 0%) under section 25 of Part II of Schedule VI whereas breast implant products used in a cosmetic surgical procedure are taxable in accordance with section 1.2 of that Part.
Ruling Requested
You would like confirmation of your understanding of the circumstances in which the GST/HST applies to the supply of breast implant products.
Ruling Given
Supplies of breast implant products made by a supplier such as the Corporation to regional distributors, hospitals and plastic surgeons are zero-rated pursuant to section 25 of Part II of Schedule VI when such products may be subsequently used by these persons in either reconstructive or cosmetic surgical procedures.
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
Part II of Schedule VI lists the supplies of medical and assistive devices that are zero-rated for purposes of the GST/HST. Section 25 of this Part describes the following:
"A supply of a medical or surgical prosthesis, or an ileostomy, colostomy or urinary appliance or similar article that is designed to be worn by an individual."
The CRA generally considers that breast implant products to be a medical or surgical prosthesis. However, section 25 is not read in isolation. For supplies of breast implant products to be zero-rated certain conditions have to be met. That is, this section is subject to the condition set out in section 1.1 of Part II of Schedule VI, which requires that the supply of any medical or assistive device listed in that Part must be designed for human use or for assisting an individual with a disability or impairment.
In addition, section 1.2 of Part II of Schedule VI provides that a cosmetic service supply (as defined in section 1 of Part II of Schedule V) and any supply of goods or services that is in respect of a cosmetic service supply that is not made for medical or reconstructive purposes is not zero-rated under this Part. A "cosmetic service supply" is defined to mean a supply of a good or a service that is made for cosmetic purposes and not for medical or reconstructive purposes. Cosmetic procedures would generally include procedures aimed at enhancing one's appearance, which may include breast augmentation surgery.
Section 1.2 of Part II of Schedule VI applies to supplies made after March 4, 2010. This section also applies to supplies made on or before March 4, 2010 if the supplier charged, collected or remitted GST/HST in respect of the supply.
Thus, if a supply of a medical or surgical prosthesis is made for cosmetic purposes it is not zero-rated. If a supply of a medical or surgical prosthesis is in respect of another supply that is made for cosmetic purposes zero-rated status will not apply to the supply of the prosthesis.
When the supplier is a manufacturer or a retailer and the supply is made to a recipient such as a distributor, hospital or plastic surgeon, the supply made between these parties would generally be zero-rated pursuant to section 25 of Part II of Schedule VI.
Hospitals and plastic surgeons acquire breast implant products as inputs into their supplies of surgical services they make to their patients. It is at this stage when it can be determined whether the breast implant product is to be surgically implanted as part of a cosmetic service supply or in connection with a cosmetic service supply and whether the GST applies at the rate of 5% or the HST applies at the rate of 12%, 13% or 15% on the supply of the surgical procedure and breast implant products relating to that procedure.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 1-800-952-6761. 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,
Susan Eastman
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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