The Tax Court of Canada denied dentist Dr. Axelrod claiming a GST refund on Input Tax Credits (“ITC’s”) claimed on his GST return. The supply of artificial teeth is considered a zero-rated supply meaning although no GST is charged to the patients, an ITC can be claimed on GST paid on related expenses. For example, dental labs can claim ITC’s on any dentures, bridges, crowns, implants, etc., they produce. However, dental service revenues are considered an exempt supply that does not allow a claim for GST paid on any related expense.
The Tax Court concluded that Dr. Axelrod was supplying an exempt health care service rather than a zero-rated supply of artificial teeth, and therefore he would not be entitled to a GST refund. The distinction being that it was impractical to separate the supply of artificial teeth from the provision of services to affix them to the patient. Taken as one whole supply, the services are considered exempt from GST and no ITC’s may be claimed.
The judge stated: “It is difficult to imagine that the patient of Dr. Axelrod would have wanted to acquire dentures, bridge, crown or implant without Dr. Axelrod having first done all of the preliminary work necessary to ensure that the particular prosthesis would fit and function properly in the patient’s mouth, and without Dr. Axelrod actually installing the prosthesis in the patient’s mouth. Similarly, all of the dental services rendered by Dr. Axelrod would have made no sense if they had not been related to the prosthesis desired by the patient. “
Dr. Axelrod appealed and lost his appeal in a December 2022 decision.
