Drugs and biologicals are generally subject to GST and QST if they are considered to be drugs and are intended for human use. However, some are zero-rated if they meet certain criteria.

Criteria

As a rule, drugs and biologicals intended for human use are zero-rated if they meet any of the following criteria:

• They are federally controlled under the Food and Drugs Act, the Food and Drug Regulations and the Narcotic Control Regulations.
• They are dispensed by a physician or dentist for personal consumption or use by the individual or a person related to the individual.
• They are dispensed under a prescription issued by a physician, dentist or authorized individual for personal consumption or use by the individual named on the prescription.
• They are authorized under the Food and Drug Regulations for use in emergency treatment.

Zero-rated drugs

Some drugs intended for human use are zero-rated throughout the production and distribution chain regardless of who acquires them. They may also be imported into Canada or brought into Québec tax-free if the person who officially does so meets the requirements set by Health Canada.

Examples include:

• drugs containing a narcotic included in the schedule to the Narcotic Control Regulations, except for drugs that may be sold without a prescription under the Controlled Drugs and Substances Act and the regulations made pursuant to it;
• drugs and other substances listed in the schedule to Part G of the Food and Drug Regulations, such as amphetamines and methamphetamines, some barbiturates and certain anabolic steroids and their derivatives;
• drugs included, individually or by class, in the list of prescription drugs established under the Food and Drugs Act (except for certain drugs and mixtures of drugs that may be sold without a prescription under the Act or the Food and Drug Regulations;
• drugs included in schedules C and D to the Food and Drugs Act, such as:  
  • blood,
  • blood derivatives,
  • immunizing agents,
  • monoclonal antibodies,
  • plasma expanders,
  • insulin,
  • interferon, and
  • allergenic substances used for the treatment or diagnosis of allergic or immunological diseases;
• drugs referred to in Schedule 1 to the Benzodiazepines and Other Targeted Substances Regulations;
• digoxin;
• digitoxin;
• prenylamine;
• deslanoside;
• erythrityl tetranitrate;
• isosorbide dinitrate;
• isosorbide-5-mononitrate;
• nitroglycerine;
• quinidine and its salts;
• epinephrine and its salts; 
• naloxone and its salts;
• medical oxygen.

Sale of gas

Hospitals and other health-care institutions buy many types of gas intended for medical use. Oxygen, which is commonly used during surgery, is considered a controlled drug and is zero-rated. Consequently, suppliers of this gas do not have to collect GST and QST even when the recipient is a health-care institution.

All sales of gas to hospitals (except for sales of unconditionally zero-rated gas such as oxygen) are taxable. However, as in the case of sales of medical equipment, hospitals, facility operators and external suppliers are entitled to a rebate, or partial refund, equal to 83% of the GST and 51.5% of the QST they paid on taxable gas. 

Likewise, non-profit organizations that operate a healthcare institution otherwise than for profit are entitled to a rebate, or partial refund, equal to 50% of the GST and 50% of the QST they paid on taxable gas. For more information, see Canada Revenue Agency guide RC4034, GST/HST Public Service Bodies' Rebate.

Dispensing services

Only pharmacists are authorized to dispense drugs at retail, and they normally charge dispensing fees for this service. Clients do not have to pay GST or QST on such fees when the service is supplied in conjunction with the sale of zero-rated prescription drugs.