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Edited version of private ruling
Authorisation Number: 1011617800746
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Ruling
Subject: GST and medical aids and appliances
Question
Is your importation of a particular type of product a non-taxable importation?
Answer: Yes.
Relevant facts and circumstances
You are registered for GST.
You are to import a particular type of product (Product) to supply to your customers.
The Product is a device that can be used with medical equipment.
The purpose of the Product is to make the medical equipment easier to use and to reduce possible mistakes while using the equipment.
The Product is registered with an Australian Organisation responsible for the use of such equipment.
Reasons for decision
Summary
The importation of the Product is non-taxable as its supply in Australia would be GST-free.
Detailed reasoning
Section 13-10 of the GST Act provides that an importation is non-taxable if it would have been a supply that was GST-free (or input taxed) if it had been a supply.
Therefore, to determine if your importation of the Product is non-taxable, it becomes necessary to determine if the supply of the Product would be GST-free if the supply were made in Australia.
GST-free supply
Division 38 of the GST Act sets out those supplies that are GST-free. In the case of medical aids and appliances, of importance is subsection 38-45(1) of the GST Act, which states:
2. A supply is GST-free if:
(a) it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and
(b) the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.
Therefore, for the supply of a medical aid or appliance to be GST-free, the supply must meet all the requirements listed in subsection 38-45(1) of the GST Act.
Please note that an item which satisfies all of the requirements listed in the above subsection will be GST-free at all points in the supply chain. This means that supplies of these items do not have to be made to ill or disabled people directly in order to be GST-free. Supplies of these items to business entities will still be GST-free where the above requirements are met.
Schedule 3
There are no items in Schedule 3 of the GST Act or in the A New Tax System (Goods and Services Tax) Regulations 1999 that specifically list the Product or similar device. However, there is an item in the table in Schedule 3 of the GST Act (Item XX) that lists accessories to medical equipment used in treating patients.
The word accessory is not defined in the GST Act. Accordingly, it is necessary to consider the ordinary meaning of that word. The Australian Concise Oxford Dictionary 2004 (11th edition revised 2009) defines the word accessory to include 'an additional or extra thing' or 'a small attachment or fitting'. The Macquarie Dictionary 2009 (5th Edition) defines 'accessory' as 'a subordinate part or object; something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle'.
The meaning of the word accessory has also been considered in a number of cases relating to sales tax and customs tariff classification. In FC of T v Polaroid Australia Pty Ltd 71 ATC 4249; (1971) 2 ATR 653, Gibbs J., stated: 'The ordinary dictionary meaning of the accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it'.
In Zendel Australia Ltd & Others v FC of T 92 ATC 4515; (1992) 24 ATR 101, Hill J held that an accessory must contribute to the working of some principal item or its general effect and also an accessory must be an adjunct to an item rather than an adjunct to a process.
The Product has been designed to make the listed medical equipment easier to use and to reduce possible mistakes while using the equipment.
Given this, the Product is an adjunct to the listed medical equipment. Therefore, it is an accessory to this equipment and hence covered by Item XX.
Specifically designed for people with an illness or disability
As stated, the Product has been designed to make the medical equipment easier to use and to reduce possible mistakes while using the equipment. It is also registered with ATGA. Given the purpose of the Product, its design and its registration with an Australian Organisation responsible for the use of such equipment, we consider that it has been specifically designed for people with an illness or disability.
Not widely used by people without an illness or disability
In determining whether a medical aid or appliance is widely used by people without an illness or disability, items 1.c. and 1.d. of the GST Pharmaceutical Health Forum Issues Register (available from the ATO website www.ato.gov.au ) provides the following:
In determining whether a medical aid and appliance is specifically designed for people with an illness or disability reference should be made to the designer's/manufacturer's intention of how the good is to be used and it's features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased
In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased.
Subsection 38-45(1) does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products.
Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to it's manufactured purpose will not prevent the good from being GST-free.
In your case, the reason your customers purchase the Product solely as an accessory for equipment used to treat patients. Accordingly, it is considered (given the view provided by the Issues Register) that the Product is not widely used by people without an illness or disability.
As such, your supply of the Product would meet the remaining requirements of subsection 38-45(1) of the GST Act and consequently, your supply of the Product would be GST-free.
As a consequence, the importation of the Product is non-taxable as per section 13-10 of the GST Act.
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