14 June 1996 GST/HST Interpretation 1996-06-14 - The Application of the Goods and Services Tax (GST) to the Supply of Health Care Services

Dear XXXXX

This is in response to your telephone conversation with Mr. Lance Dixon in which you requested general information regarding the application of the Goods and Services Tax (GST) to the supply of health care services and reports by contracted medical practitioners and psychologists. It is our understanding services are supplied to XXXXX Where a medical practitioner (including psychiatrists certified by the Royal College of Physicians and Surgeons XXXXX of Canada) examines an individual and prepares a report as a result of the examination, the examination is considered to be a health care service rendered to an individual. Any report produced thereafter is secondary to the supply of the health care provided. Consequently, the supply of the primary or initial examination/report is therefore exempt of the GST pursuant to section 5 of Part II of Schedule V to the Excise Tax Act (ETA) which reads as follows:

"A supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes)".

As requested, please find attached a synopsis of our departmental policy respecting the GST status of the supply of medical reports.

Pursuant to paragraph 7(j) of Part II of Schedule V to the ETA a supply of psychological services when rendered to an individual (where the supply is made by a practitioner of the service) is considered to be an exempt supply. This would include reports prepared by a psychologist for purposes of assessment and treatment of sexual/violent offenders or HIV/AIDS carriers.

For a psychologist to qualify for this tax exempt status, he/she must be a "practitioner" of the service listed in section 7 of Part II of Schedule V to the ETA. A practitioner in respect of a supply of psychological services means a person who:

(a) is licensed or otherwise certified to practice the profession of psychology in the province in which the service is supplied, or

(b) where the person is not required to be licensed or otherwise certified to practice the profession of the person in the province in which the service is supplied, has the qualifications equivalent to those necessary to be so licensed or otherwise certified in another province, and

(c) in respect of the supply of psychological services, is registered in the Canadian Register of Health Service Providers in Psychology, and practices the profession of psychology.

Therefore, to qualify under this definition, a psychologist, in addition to being licensed or otherwise certified to practice the profession of psychology in the province in which the service is provided, must also be registered in the Canadian Register of Health Service Providers in Psychology.

I wish to point out, that medical or psychological services must be rendered to an individual, (i.e., a natural person). Services provided to or reports prepared by contracted physicians and psychologists for use by your Department in developing training programs, statistical studies, analysis, or for reasons other than the provision of medical or psychological services to individuals XXXXX do not meet the exempting provisions of sections 5 or 7 of Part II of Schedule V to the ETA). Consequently, the supply of these services are taxable at the rate of 7%.

With respect to registration, input tax credits (ITCs) and a "small supplier" I offer the following general comments:

If a person only makes GST exempt supplies, he or she is not permitted to become a GST registrant. An unregistered business is not entitled to claim, through any credit or refund mechanism, the GST paid on its expenses. However, a person making both exempt and taxable supplies may voluntarily register for the GST even though they qualify as a "small supplier" pursuant to section 148 of the ETA. As such they will be required to collect and remit the GST for their taxable supplies. GST paid on their business expenses will be refunded by way of ITCs'.

When a person makes a taxable supply in the course of a commercial activity in Canada, that person is required to be registered for the GST provided that the person is not a "small supplier". If a person does not voluntarily register for the GST, the person is a small supplier until the time the person surpasses $30,000.00 gross revenue (the threshold) either in one calendar quarter or cumulatively in four quarters. Where a person surpasses the threshold in one calendar quarter, the person ceases to be a small supplier immediately prior to making the supply that put the person over the threshold. Where a person surpasses the threshold; in the fourth of four consecutive quarters, the person ceases to be a small supplier at the end of the month following the fourth quarter. As requested, attached please find copies of chapters 2 (Registration), 2.1 (Required Registration) and 2.3 (Voluntary Registration) of the GST Memoranda Series.

In response to your question regarding reimbursement of expenses inclusive of the GST to contracted professionals, we regret we cannot provide any comments until we have received more specific details on the transactions, including a review of the written contract between your Department and the contracted professionals. As per your request, attached please find a copy of GST Memorandum 400, entitled, "Input Tax Credits". Please note this publication is presently being revised to include amendments to the ETA tabled in the Notice of Ways and Means Motion, Draft Regulations and Explanatory Notes announced on April 23, 1996.

If you have any questions or require further clarification regarding this issue please contact, Ms Donna Harding, A/Manager, Governments, at (613) 954-3551.

Yours truly,

J.A. Venne
Director
Special Sectors
GST Rulings and Interpretations
Attachments:Policy and Legislation

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