Pharmacists Lose Out in the Budget!

In the 2012 Federal Budget, several changes to the Excise Tax Act (ETA) were proposed with one being a new GST/HST exemption on certain services provided by pharmacists. The new classification was introduced in response to recent changes made by provincial governments expanding the number of health care services allowed to be provided by pharmacists.

Under the proposed changes, to be consistent with other health care practitioners, services provided to an individual by a pharmacist in a pharmacist-patient relationship will be GST/HST exempt. The types of services affected are those provided for the promotion of the health of the patient or the prevention and/or treatment of a disease, disorder, or dysfunction of the patient. Possible examples of GST/HST exempt pharmacist's services are:

1. The ordering and interpreting of lab tests
2. The administering of medications or vaccinations
3. Changing drug dosages
4. Drug prescriptions

The new rules will apply to health care services provided after March 29, 2012. The major exception to the GST/HST exemption is the service of dispensing a zero-rated drug, which will remain a zero-rated supply.

The impact for pharmacists will be significant as their practices will now include both zero-rated and exempt activities. Under the ETA, exempt supplies are not considered commercial activities, resulting in the denial of input tax credits otherwise to be claimed in order to recover the GST/HST paid on expenditures incurred for the provision of the exempt supplies. However, full input tax credits are still available for expenditures related to the provision of the zero-rated supplies. For pharmacists to ensure that they are compliant with the new GST/HST rules and to minimize their GST/HST costs, they will need to review and update their GST/HST calculations. Since the tax changes are effective March 29, 2012, failure to comply could result in costly assessments and penalties by the CRA.

Collins Barrow Can Help

1. Review your present GST/HST reporting procedures.
2. Assist in implementing up to date procedures to conform to new legislation.
3. Adjust present systemic and procedural strategies

Altaf Sarangi, CA, is a Tax Partner and Alex Kwong, CA, is a Senior Tax Associate in the Toronto office of Collins Barrow.