Davis Dentistry had claimed input tax credits (ITCs) on the basis that a portion of its supplies to each orthodontic patient was of a zero-rated supply of the orthodontic appliance, and that only the balance of what was supplied was an exempt healthcare service, whereas CRA had disallowed its ITC claims on the basis that under the single-supply doctrine, as enunciated in O.A. Brown, there was a single supply of exempt orthodontic services.
In dismissing the Crown’s appeal, Woods JA stated (at para. 35) that “Parliament’s intent must override O.A. Brown where legislative intent is clear as it is in the provisions applicable in this case.” Indicators of such intent included (paras. 39, 42):
In the case of a supply of orthodontic appliances and orthodontic services, which are typically supplied together, the fact that one has zero-rated status and the other has exempt status strongly suggests that this was intentional and that a supply of an orthodontic appliance is intended to be zero-rated even when accompanied by orthodontic services. …
It is highly unlikely that Parliament would explicitly provide that any supply of an orthodontic appliance is zero-rated if the intention is that the supply is restricted to the wholesale level.