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Ottawa, April 12, 2001
2001-041

Proposed GST/HST Amendments Announced Relating to Tax-Free Products and Prescribed Rebate Recipients

Related document:

• Proposed Amendments to the Excise Tax Act.

Finance Minister Paul Martin today announced proposed refinements to the goods and services tax and harmonized sales tax (GST/HST). These amendments would:

• add to the schedule of tax-free or "zero-rated" goods under the Excise Tax Act; and
• expand the list of prescribed literacy organizations that are eligible to receive rebates of tax on their purchases of reading materials and audio-recordings of printed books.

Specifically, the Minister proposed an amendment to zero-rate sales and importations of a blood substitute product known as plasma expander. This product is purchased by the blood agencies and distributed to hospitals and other health care providers for use in maintaining patients’ circulatory blood volume during surgical procedures or trauma care. This amendment would ensure that the GST/HST treatment of plasma expander is consistent with that of blood derivatives and those drugs that are already tax-free.

The second proposed amendment to the schedule of tax-free goods would zero-rate the grain or seeds, or the mature stalks (i.e., straw), of industrial hemp plants. This treatment would apply where their sale or importation is in accordance with the Controlled Drugs and Substances Act or is excluded from the application of that Act.

Industrial hemp is a plant crop from which a wide variety of commodities are made, from edible oil products to paints and varnishes. Industrial hemp refers to varieties of the hemp plant that contain very low concentrations of the psychoactive component THC. The commercial cultivation of industrial hemp in Canada was re-introduced in 1998 and is now permitted to be grown under licences and authorizations issued by Health Canada.

Currently, the grain or seeds of most other plant crops, and primary products such as fodder, straw and hops, can be purchased and sold by farmers on a tax-free basis. This amendment brings the GST/HST treatment of industrial hemp into line with that of other farm products.

The attached draft of the amendments to the Excise Tax Act provides further details of these proposed additions to the schedule of zero-rated items under the GST/HST.

Both measures are proposed to apply to importations after today and to sales for which all or part of the payment becomes due after today. All references to "Announcement Date" should be read as references to today’s date.

Finally, the Minister proposed two additions to the Federal Book Rebate (GST/HST) Regulations, which prescribe organizations eligible to receive the 100-per-cent federal rebate of the GST, or the federal component of the HST, on certain reading materials and audio-recordings of printed books. This amendment would add to the list of eligible rebate recipients the AlphaPlus Centre / Centre AlphaPlus, effective March 30, 1998, and the Barrie Literary Council, effective February 1, 1997.

Since October 24, 1996, the rebate has been available to educational institutions and libraries, as well as prescribed charities and non-profit organizations whose primary purpose is the promotion of literacy.

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