Financial Services Case Pits Supplier Against Recipient

Whether or not a supply is a financial service is a significant issue for suppliers because suppliers of financial services are unable to claim ITCs for the GST/HST they pay on their inputs. Accordingly, financial service providers scrutinize their own suppliers carefully to ensure they are only paying GST/HST where appropriate.

In the recent case of The Great-West Life Assurance Company v. The Queen (2015 TCC 225), Great-West was seeking a rebate for tax paid in error to one of its suppliers whom Great-West claimed was actually providing financial services. Interestingly the supplier testified against Great-West in a case which revisits how the exemptions to the definition of financial services apply. Great West has filed an appeal to the Federal Court of Appeal.

On the facts, Great-West had entered into two agreements over a period of 5 years with its supplier, Emergis Inc. and their successor Telus Health Solutions (collectively "Emergis"). Under the Agreements Emergis provided Great-West with payment agent and administration services in respect of the Assure Card pharmacy benefits coverage system. Through the Assure Card system, a pharmacist could submit a claim to Emergis on behalf of a Great-West plan member who possessed an Assure Card to determine. If the claim was approved the pharmacist would net out the value of the benefits and only charge the Great-West plan member the amount, if any, not covered by Great-West. Emergis facilitated payments from Great-West to the pharmacies of the claim amount.

Emergis viewed itself as a provider of taxable services, and charged and collected GST/HST from Great-West accordingly. Great-West disagreed, and filed rebate applications with the CRA, seeking rebates of tax "paid in error" on the basis that Emergis was providing an exempt financial service and should not have been charging GST/HST on its services.

The TCC began by noting that both parties had argued this was a case of a single compound supply, and not multiple supplies that could be analyzed separately. The TCC nevertheless undertook some brief analysis to determine that it agreed with the parties.

The TCC then moved on to consider whether that single supply constituted a financial service, and applied the test as formulated by the FCA in Global Cash Access case (2013 FCA 269). The TCC determined that the substance of the supply was the provision of real-time electronic pharmacy transaction, verifying and adjudicating claim eligibility...