ATO Interpretative Decision

ATO ID 2002/713

Goods and Services Tax

GST and spare parts for a TENS machine
FOI status: may be released
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Issue

Is the entity, a supplier of parts, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies electrodes and pads for a transcutaneous nerve stimulator machine (TENS machine)?

Decision

Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.

Facts

The entity is a supplier of parts. The entity is supplying electrodes and pads for a TENS machine. The electrodes and pads are designed to be used with the TENS machine and cannot be used for any other purpose. The electrodes and pads on the TENS machine require replacing when they become worn, faulty or broken.

The supply of a TENS machine is GST-free under subsection 38-45(1) of the GST Act.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Subsection 38-45(2) of the GST Act provides that a supply is GST-free if the thing supplied is:

•
supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and
•
specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.

The first requirement is that the thing supplied must be supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act. The term 'spare part' is not defined in the GST Act. Therefore, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'.

The entity is supplying electrodes and pads that replace the worn, faulty or broken electrodes and pads on a TENS machine. As such, the electrodes and pads are spare parts for the purposes of the GST Act.

The supply of the TENS machine is GST-free under subsection 38-45(1) of the GST Act. The electrodes and pads are supplied as spare parts for a TENS machine. Therefore, the electrodes and pads are supplied as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.

The second requirement in subsection 38-45(2) of the GST Act is that the spare part must be specifically designed as a spare part for the GST-free medical aid or appliance. The electrodes and pads are designed for use with the TENS machine and cannot be used for any other purpose. Therefore, the electrodes and pads are specifically designed as a spare part for the TENS machine.

As all of the requirement in subsection 38-45(2) of the GST Act are met, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.

[Note: As the supply of the electrodes and pads is GST-free under subsection 38-45(2) of the GST Act, the importation of the electrodes and pads is a non-taxable importation under section 13-10 of the GST Act.]

Date of decision:  5 March 2002

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 13-10
   subsection 38-45(1)
   subsection 38-45(2)

Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales

Keywords
Goods & services tax
GST free
GST health
Section 38-45 - medical aids & appliances

Siebel/TDMS Reference Number:  CW266333

Business Line:  Indirect Tax

Date of publication:  31 July 2002

ISSN: 1445-2782

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