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Taxation - Goods and Services Tax (GST) - Exempt supplies - Financial services - Special cases - Insurers - Appeals

Thursday, February 02, 2017 @ 7:00 PM  


Appeal by Great-West Life Assurance Company (Great-West) from the dismissal of its appeals from GST assessments on fees it collected for services provided in connection with group health benefits plans it offered to employers. The benefit plans included coverage for drugs and dental care for employees and their families. Great-West assumed the risk in providing benefits in exchange for an insurance premium with respect to the prescription drug component, while the employer assumed the risk and Great-West earned a service fee for other components of its plans. Emergis provided services to Great-West which involved receiving and adjudicating benefits claims from employees and arranging for benefits to be paid on a real-time basis. Emergis Inc. (Emergis) provided this service by making agreements with pharmacies, pursuant to which pharmacies would fill prescriptions for card-carrying employees covered by Great-West on the understanding that payment would follow from Emergis. Emergis would pay the pharmacies on behalf of Great-West, using Great-West’s funds. Emergis earned a fee for each drug transaction, whether or not the claim was approved. Emergis also provided a call centre for the use of employers and pharmacies, among other services. It was common ground that the services provided by Emergis and Great-West constituted a single compound supply, rather than multiple supplies. The judge determined that the essential character of the supply was the payment of the drug benefits to employees, not the provision of financial services. The judge found the supply did not fall within the GST exclusions for financial services because Emergis’ services went beyond solely making payments.

HELD: Appeal dismissed. It was the clear intention of Parliament to limit the GST exclusion to the payment out of insurance proceeds. The services Emergis provided went beyond simply paying out claims and involved administration of the claims and payment process. The judge did not improperly take into account non-predominant elements of the Emergis services in determining their character as administrative rather that purely financial.