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GOODS AND SERVICES TAX (GST) - Taxable supply - Zero-rated supplies - Drugs and biochemicals

Thursday, March 26, 2020 @ 9:36 AM  


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Appeal by Patterson Dental from the dismissal of its appeal from an assessment made under the Excise Tax Act. The appellant carried on the business of selling and distributing dental products to dentists in Canada. Prior to 2005, the appellant sold anesthetic solutions that contained epinephrine as taxable supplies. From 2005 to 2008, it considered its anesthetic solutions to be zero-rated supplies and did not charge GST to its clients. After the appellant learned of a letter of interpretation issued by the Minister that indicated the Minister considered the solutions to be taxable supplies, it once again treated the solutions as taxable supplies. The assessment found that GST of $1,111,931 was payable in respect of the anesthetic solutions sold by the appellant as zero-rated supplies.

HELD: Appeal dismissed. The appellant’s solutions were not a single supply comprised of a taxable and zero-rated element as the epinephrine in the solutions was for a different function than when administered in a life-threatening circumstance, where it was the sole active ingredient in the medication. Even if the solutions were considered such a supply, the predominant element in the solutions was not epinephrine but rather the local anesthetic. The Tax Court did not err in finding the appellant’s solutions were subject to GST.

Patterson Dental Canada Inc. v. Canada, [2020] F.C.J. No. 189, Federal Court of Appeal, R. Boivin, Y. de Montigny and M.J.L. Gleason JJ.A., February 7, 2020. Digest No. TLD-March232020008