The Canada Revenue Agency (CRA) published the Excise and GST/HST News – No.93i; a document aimed at providing updates and guidance on new and existing Canadian tax laws. In the publication, the CRA added the reminder that imports of drug supplies into Canada (including drugs imported for clinical trials) are subject to GST or HST unless specifically exempted as a non-taxable importation or zero-rated supply.

What is GST/HST?

The goods and services tax (GST) and harmonized sales tax (HST) is a tax that applies to the supply of most goods and services in Canada except for items specified as non-taxable importations. The Canada Revenue Agency publishes a list of supplies deemed as non-taxable importations.

(HST) is imposed in provinces that have harmonized their provincial sales tax with the GST; these provinces are referred to as the “participating provinces”. The participating provinces are New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario and Prince Edward Island. In the remaining provinces and territories, GST is imposed.

The GST/HST is calculated on the Canadian dollar value of goods, including duty and excise tax, and is collected at the border at the same time as these duties and taxes. The owner or importer of record is liable for the payment of the GST/HST on imported goods.

Are all drug supplies subject GST/HST?

While imports of drug supplies into Canada are generally subject to GST or HST, certain non-taxable importations are exempted from GST. Non-taxable importations include certain low value shipments and zero-rated supplies which are a limited number of goods and services that are taxable at the rate of 0%.

What are zero-rated drugs?

The section of the Excise and GST/HST News – No. 93 entitled “New Drug subscriptions” specifically points out that those drugs currently listed in the Prescription Drug List or included in section 2 of Part I of Schedule VI of the Excise Tax Act are to be zero rated.

Zero-rated drugs are those drugs listed in Section 2, of Part I of Schedule VI of the Excise Tax Act and include:

1. Drugs included in Schedule C (i.e., Radiopharmaceuticals) or D (i.e., Biologic drugs) of the Food and Drug Act

2. Drugs listed in the Prescription Drug list other than a drug or mixture of drugs that may, under that Act or the Food and Drug Regulations, be sold to a consumer without a prescription

3. Drugs or other substance included in the schedule to Part G (i.e., Controlled drug) of the Food and Drug Regulations,

4. A supply of a drug when the drug is for human use and is dispensed
a. By a medical practitioner to an individual for the personal consumption or use of the individual or an individual related thereto; or
b. On the prescription of a medical practitioner or authorized individual for the personal consumption or use of the individual named in the prescription.

What does this mean for shipments to Canada that Marken arranges?

Shipments of drugs, (including drugs for clinical trials) to Canada are subject to GST/HST unless they qualify as a non-taxable importation or are specifically zero-rated under Section 2, of Part I of Schedule VI of the Excise Tax Act.

Any questions regarding this guidance can be addressed to tradecompliance@marken.com.