1.c.1 During surgery a medical practitioner fits a patient with an appliance for the purpose of correcting an illness or disability. Will these goods supplied at that time be GST-free?
For source of ATO view, refer to:
- issue 1.c of this issues register
- GSTD 2012/4External Link - Goods and services tax: what is 'hospital treatment' for the purposes of section 38-20 of the A New Tax System (Goods and Services Tax) Act 1999
This question requires the consideration of sections 38-20, 38-45 and 38-7 and focuses upon the supply of the goods during a surgical process.
The goods may be GST-free pursuant to section 38-45 if they are:
- a medical aid or appliance covered by Schedule 3 or subsequent regulation, and
- the medical aid or appliance is specifically designed for people with an illness or disability, and
- the medical aid or appliance is not widely used by people without an illness or disability.
Once an item meets all of the above criteria its supply will be GST-free. The GST-free status will apply all the way down the supply chain and not only when supplied to a person who has an illness or disability. The elements do not require the recipient of the aid or appliance to use it in a particular way. An example of medical aids and appliances that are contained in Schedule 3 are heart monitors and pacemakers (Items 1 and 2 of Schedule 3).
With effect from 26 March 2009, the definition of 'hospital treatment' changed from subsection 67(4) of the National Health Act 1953 to section 121-5 of the Private Health Insurance Act 2007. This means that goods used to manage a disease, injury or condition supplied to a hospital patient will generally be GST-free as part of hospital treatment under subsection 38-20(1).
In addition, subsection 38-20(3) also provides that a supply of goods will be GST-free if it is directly related to the supply of the GST-free hospital treatment and it is supplied by, or on behalf of, the supplier of GST-free hospital treatment. The supply of goods which are not ‘directly related’ to the supply of GST-free hospital treatment will not be GST-free under subsection 38-20(3).
If neither section 38-45 nor section 38-20 applies to the goods it is necessary to consider the application of subsection 38-7(3). This section requires the supply of goods be made to an individual ‘in the course of supplying to him or her, a *medical service the supply of which is GST-free’ and be ‘made at the premises at which the medical service is supplied’. It is considered that the fitting of an appliance during the course of a surgical procedure would be provided in the course of supplying to the patient a medical service at the premises, being the hospital, at which the medical service is supplied. It is also necessary that the appliance be supplied at that same point in time as the GST-free medical service. Goods supplied to a patient prior to the *medical service, for fitting during the *medical service, will not be supplied ‘in the course of supplying to him or her, a *medical service’.