GST/HST and Excise Tax Measures

March 29, 2012

IN THIS SECTION:

GST/HST Health Care Exemptions and Zero-Rating Expanded

Basic health care services are treated as exempt from the Goods and Services Tax/Harmonized Sales Tax (“GST/HST”). Exempt treatment means that suppliers do not charge GST/HST, but they cannot claim input tax credits to recover the GST/HST paid on inputs in relation to these supplies (so the services have a built in tax cost).

In addition, medical devices, prescription drugs and certain other drugs used to treat life-threatening conditions are zero-rated. Zero-rating means that suppliers do not charge purchasers GST/HST on these medical devices or drugs, but these suppliers are entitled to claim input tax credits to recover the GST/HST paid on inputs in relation to these supplies so that the supplies are truly tax free.

Pharmacists’ Services – Expanded Exempt Services

Provincial governments have recently expanded the health care services that pharmacists are authorized to perform in the course of their professional practice beyond those of dispensing drugs, including:

  • ordering and interpreting lab tests;
  • administering medications and vaccinations;
  • changing drug dosages; and
  • prescribing drugs for certain minor ailments.

The Budget proposes to exempt other non-dispensing health care services rendered by individual pharmacists within a pharmacist-patient relationship. This would include those services, such as those listed above, that pharmacists are authorized to provide in the course of their professional practice. This is accomplished by adding new section 7.3 to Part II, Schedule V.

In addition, certain prescribed diagnostic health care services, such as blood tests, are currently exempt when ordered by physicians or registered nurses. The Budget proposes to expand the exemption for prescribed diagnostic health care services that are ordered by pharmacists when the pharmacists are authorized to issue such orders under the laws of a province. This is implemented by adding provincially authorized pharmacists to the types of other health care practitioners who can prescribe under Section 10, Part II of Schedule V.

This measure will apply to supplies made after Budget Day.

Corrective Eyewear

Similar to that of Pharmacists, opticians have been authorized under recent changes to provincial laws to, in certain circumstances, conduct vision assessments and produce records of the assessment that authorize the dispensing of corrective eyewear. The Budget proposes to zero-rate corrective eyeglasses or contact lenses supplied under the authority of a prescription or an assessment record produced by an optician who is entitled under the laws of the province in which the person practices to prescribe or to produce the record authorizing dispensing of corrective eyewear. This provision replaces the undefined “eye care professional” term and appears to expand the list of persons authorized to prescribe zero-rated eyewear under Section 9, Part II, Schedule VI.

This measure will apply to supplies made after Budget Day and also to supplies made on or before that day if GST/HST was not charged, collected or remitted in respect of the supply.

Medical and Assistive Devices

Various medical and assistive devices that are specially designed to assist individuals with chronic disease, illness or a physical disability are zero-rated when prescribed by a medical practitioner.

The Budget proposes to add blood coagulation monitoring or metering devices and associated test strips designed for use by individuals requiring blood coagulation monitoring or metering.

The devices currently tax free will also be expanded by zero-rating certain of the listed medical and assistive devices when supplied on the written order of a registered nurse, occupational therapist or physiotherapist as part of their professional practice. Currently, such devices are only zero-rated when supplied on the written order of a medical practitioner.

These measures will apply to supplies made after Budget Day.

Drugs

The Budget also proposes to add Isosorbide-5-mononitrate, a drug used to treat congestive heart failure, to the list of zero-rated non-prescription drugs in Part I, Schedule VI.

This measure will apply to supplies made after Budget Day and also to supplies made on or before that day if GST/HST was not charged, collected or remitted in respect of the supply.

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Doubling GST/HST Streamlined Accounting Thresholds

To simplify and facilitate GST/HST compliance by small businesses and public services bodies (“PSB”), the Budget proposes to double the existing Streamlined Accounting thresholds.

The threshold below which small businesses can elect to use the Quick Method will increase from $200,000 to $400,000 in annual GST/HST-included taxable sales.

The small business and PSB Streamlined Input Tax Credit Method and PSB Rebate Calculation Method threshold will increase from $500,000 to $1,000,000 of annual taxable sales and from $2,000,000 to $4,000,000 of annual taxable purchases, respectively.

This measure will take effect in respect of a GST/HST reporting period of a person beginning after 2012.

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GST and Excise Tax Relief for Foreign-Based Rental Vehicles Temporarily Imported by Canadian Residents

Perhaps to the surprise of many Canadians, foreign-based rental vehicles temporarily imported by Canadian residents are generally subject to GST on the full value of the vehicle, the Excise Tax “Gas-Guzzler” or Green Levy on certain “fuel-inefficient” passenger vehicles, and the automobile air conditioner excise tax. Generally, these taxes do not apply to foreign-based rental vehicles temporarily imported by foreign residents visiting Canada.

The Budget proposes changes to the tax treatment of rental vehicles temporarily imported by Canadian residents to enable the temporary importation of these rental vehicles for a period not exceeding 30 days. Specifically, the Budget proposes to:

  • relieve GST/HST on foreign-based rental vehicles temporarily imported by Canadian residents who have been outside Canada for at least 48 hours;
  • levy GST/HST on a partial basis on foreign-based rental vehicles temporarily imported by Canadian residents who have been outside Canada for less than 48 hours; and
  • fully relieve the Green Levy and the automobile air conditioner excise  taxes on all foreign-based rental vehicles temporarily imported by Canadian residents.

For a Canadian resident who has been outside Canada for less than 48 hours and who temporarily imports a foreign-based rental vehicle, the GST/HST will be levied on fixed monetary values as follows:

  • $200 for cars;
  • $300 for pickup trucks, sport utility vehicles and vans; and
  • $1,000 for recreational vehicles, such as motor homes.

These values are intended to approximate the average cost of a weekly rental of the same type of vehicle in Canada for each week or part of a week that the vehicle is in Canada.

Consistent with the revised federal vehicle safety rules that permit the temporary importation of foreign-based rental vehicles for a period not exceeding 30 days, this no tax or reduced tax treatment will apply only to foreign based rental vehicles temporarily imported for a period not exceeding 30 days.

This measure is effective for imports on or after June 1, 2012, and will be accomplished by amending section 212.2 and the Non-Taxable Imported Goods (GST/HST) Regulations.

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Application of the “Gas-Guzzler” Excise Tax or “Green Levy” on Fuel-Inefficient Vehicles

Part III Excise Tax, also known as the “Gas-Guzzler Tax” or “Green Levy”, is imposed on imported or manufactured passenger vehicles that have a weighted average fuel consumption rating of 13 or more litres per 100 kilometres as determined under the EnerGuide Mark. As the Minister of Natural Resources has announced that Canada will change the vehicle fuel consumption testing requirements to better align with those in the United States, the Budget proposes to amend the Excise Tax Act so that the weighted average fuel consumption rating for the purposes of this tax continues to be determined by reference to the current EnerGuide test method. The necessary legislative amendments will apply on Royal Assent to the enacting legislation.

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GST Rebate for Books to be Given Away

In an effort to promote literacy, the Budget proposes to allow charity and qualifying non-profit literacy organizations prescribed by Regulation to claim a rebate of GST and the federal portion of the HST on printed books that they acquire for the purpose of being given away. This expands the current GST rebate available to public libraries, educational institutions, charities and qualifying non-profit organizations whose primary purpose is the promotion of literacy.

This measure will apply to books acquired or imported after Budget Day.

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Previously Announced GST/HST Measures

The Government also confirmed its intention to proceed with the following measures:

  • Changes to rules relating to the way financial institutions calculate the provincial component of the HST (as released on January 28, 2011);
  • Technical changes relating to the reporting of recaptured input tax credits (as released on October 31, 2011);
  • Amendments to the Excise Tax Act to ensure Pooled Registered Pension Plans are subject to the same GST/HST treatment as Registered Pension Plans as released on (December 14, 2011); and
  • Proposed transitional rules relating to the elimination of the HST in British Columbia (as released February 17, 2012).

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