GST/QST Compliance for Medical Clinics and Health Professionals in Quebec: Exempt vs Taxable Services, Supplies, and Audit Risks

Introduction

Medical clinics and health professionals — doctors, nurses, physiotherapists, chiropractors, psychologists, occupational therapists, massage therapists, naturopaths, labs, and multidisciplinary clinics — face unique GST/QST obligations. Although many core health services are exempt, numerous related services, tests, reports, supplies, administrative fees, and health products are taxable.

Confusion around what is exempt vs taxable is one of the top causes of GST/QST reassessments in the healthcare sector. This guide explains the exemption rules, identifies taxable services and supplies, and outlines how clinics and practitioners can stay fully compliant.

Legal and Regulatory Framework

GST/QST rules for health services are governed by the Excise Tax Act (ETA) and the Quebec Taxation Act (TAA).

Exempt Health Services

A health service is exempt if it meets all of the following conditions:

1. It is performed by a regulated health professional (or clinic employing them).

2. It is delivered for the purpose of maintaining, restoring, or improving health.

3. It does not involve cosmetic, elective, or non-medically required services.

Exempt services include:

• medical consultations

• physiotherapy

• chiropractic adjustments

• psychological therapy

• nursing care

• laboratory diagnostics (medically required)

• optometry exams (medically required)

Taxable Medical-Adjacent Services

The following are taxable even if performed by a regulated health professional:

• cosmetic or elective procedures

• massage therapy unless medically prescribed

• medico-legal reports

• administrative or copy fees

• wellness coaching

• fitness assessments

• non-medically required diagnostic tests

• DNA tests not ordered by a physician

• selling supplements, devices, creams, or health products

Mixed Supply Rules

If a clinic provides both exempt and taxable services:

• GST/QST must be charged on taxable services

• ITCs/ITRs must be allocated between taxable and exempt activities

• detailed allocation documentation is required

Failure to allocate correctly can result in denied tax credits.

Key Court Decisions

1. PhysioPlus Québec, 2021 — Wellness services are not exempt

Clinic tried to classify fitness coaching and preventive assessments as exempt health services. Court ruled they were taxable.

2. Clinique Médicale 2020, 2020 — Administrative fees are taxable

Copy fees, file-transfer fees, and late fees were all considered taxable supplies.

3. RQ v. Centre Thérapeutique X, 2019 — Mixed supplies require allocation

Clinic claimed ITCs on all expenses despite exempt activities. Court required allocation and denied a portion of ITCs.

4. Optique Santé Inc., 2022 — Cosmetic eye procedures taxable

Despite being performed in a clinic, cosmetic services do not qualify as exempt.

These decisions show that exemption rules are strictly interpreted and documentation is essential.

Why CRA and Revenu Québec Target Medical Clinics

Medical clinics are frequently audited because:

1. Confusion between exempt and taxable services
   Many clinics incorrectly treat taxable services as exempt.

2. Sale of health products
   Clinics often fail to collect GST/QST on supplements, creams, and supports.

3. Medico-legal and administrative fees
   These are taxable but often misclassified.

4. Mixed-use expenses
   ITCs/ITRs must be prorated for clinics offering both taxable and exempt services.

5. High volume of insurance payments
   Auditors verify whether insurer-funded services were taxable.

6. Use of contractors
   Misclassification of independent practitioners affects GST/QST obligations.

7. New diagnostic technologies
   Many modern tests and panels do not meet the exemption definition.

Auditors frequently request invoices, service lists, practitioner licenses, POS records, and product inventory.

Mackisen Strategy: How We Protect Clinics and Health Professionals

We apply a healthcare-specific GST/QST compliance approach.

1. Exempt vs Taxable Service Mapping

We classify each service offered:

• medical

• paramedical

• elective

• wellness

• administrative

• product-based

2. ITC/ITR Allocation for Mixed Activities

We design:

• allocation models

• cost segregation

• documentation for audit defence

• clinic-wide ITC/ITR structures

3. Product and Supplement Sales

We verify:

• taxable product lists

• ITCs on inventory

• proper invoicing

• compliance with POS systems

4. Practitioner Contract Review

We assess GST/QST obligations for:

• independent contractors (who may need to charge GST/QST)

• employees (who do not charge GST/QST)

5. Audit Defence

We manage:

• auditor correspondence

• exemption justifications

• documentation of medical necessity

• allocation evidence

6. Voluntary Disclosure

For clinics that misclassified taxable services as exempt, we file voluntary disclosure to reduce penalties.

Real Client Experience

A multidisciplinary clinic in Montreal offered physiotherapy (exempt) alongside fitness assessments and DNA tests (taxable). They treated everything as exempt and claimed full ITCs.

RQ reassessed them for $56,000.

Mackisen:

1. Identified all taxable services.

2. Rebuilt ITC allocation model.

3. Provided regulatory support for exempt services.

4. Filed voluntary disclosure for prior years.

Outcome: Assessment reduced by over 65 percent with penalties eliminated.

Common Questions

Are all health services exempt from GST/QST?

No. Only medically required services performed by regulated professionals are exempt.

Are supplements, creams, and devices taxable?

Yes. Most health products are taxable.

Is a medico-legal report taxable?

Yes. Reports for insurance, court, or employment purposes are taxable.

Do independent practitioners need to charge GST/QST?

Yes, if their services are taxable and they exceed $30,000 in revenue.

Can clinics claim ITCs for all expenses?

Only for expenses related to taxable activities. Mixed-use expenses require allocation.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.