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Ruling

Subject: GST and importation of exercisers

Question

Will the importation of the four products be a non-taxable importation?

Answer

No, the importation of the four products will be a taxable importation.

Relevant facts and circumstances

· You are an importer of various goods and are registered for GST.

· You intend to import the products and associated parts and accessories.

· You have provided detailed information about the four products.

· The four products are designed to help relieve specified symptoms of specified illnesses or conditions.

· The products are manufactured specifically for therapeutic use and the importer sells them for the same purpose.

· The products are intended for use by persons convalescing.

· You confirmed in an email that your products are not covered in Schedule 4 to the Customs Tariff Act 1995 and will not meet the requirements of Part 3-2 of the GST Act.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Ch3-Pt3-1-Div 38.

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.

A New Tax System (Goods and Services Tax) Act 1999 Section 38-45.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1).

A New Tax System (Goods and Services Tax) Act 1999 Schedule 3.

A New Tax System (Goods and Services Tax) Regulations 1999.

Reasons for decision

GST is payable on imported goods where the importation of the goods is a taxable importation.

Under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you make a taxable importation when:  

· goods are imported, and

· you enter the goods for home consumption (within the meaning of the Customs Act 1901).  

However, the importation is not a taxable importation to the extent that it is a non-taxable importation.  

You have advised that you are importing the four products. Therefore you will be making a taxable importation unless the importation is a non-taxable importation.

Non-taxable importations

Under section 13-10 of the GST Act, an importation is a non-taxable importation if: 

(a) it is a non-taxable importation under Part 3-2 of the GST Act, or

(b) it would have been a supply that was GST-free or input taxed if it had been a supply.  

Appendix B of Goods and Services Tax Ruling GSTR 2003/15 'importation of goods into Australia' provides a list of items and a brief description of the items listed in subsection 42-5(1) of the GST Act which relates to non- taxable importations and Schedule 4 to the Customs Tariff Act 1995. This ruling is available on our website at www.ato.gov.au

You have confirmed that your importation of the goods does not satisfy the requirements of any of the items in Division 42 of the GST Act. Accordingly, it will not meet requirement (a) above for the goods to be a non-taxable importation.

An importation is also a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply. 

There are no provisions in the GST Act that would make the supply of your products an input taxed supply. 

Subsection 38-45(1) of the GST Act identifies the circumstances in which a supply of medical aids and appliances is GST-free. It essentially has three elements, all of which must be satisfied before the supply can be GST-free. The medical aid or appliance must be:

· listed in Schedule 3 or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

· specifically designed for people with an illness or disability, and

· not widely used by people without an illness or disability.

Items which are GST-free under subsection 38-45(1) of the GST Act are GST-free at all points in the supply chain from the point in time that they become listed in Schedule 3 and not only when supplied to a person who has an illness or disability.

Your four products are not specified in the GST Regulations.

You have contended that the products fit into item 127 in the table of Schedule 3 of the GST Act which lists 'respiratory appliance accessories' that are considered medical aid and appliances.

The word accessory is not defined in the GST Act. Therefore, it is appropriate to refer to the ordinary meaning of that term. The Macquarie Dictionary (version 5 - 2001) defines accessory as:

1. 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 Australian Concise Oxford Dictionary (online version) defines accessory, amongst other things, as meaning:

An additional or extra thing.

The meaning of the word accessory has also been considered in a number of cases relating to sales tax and customs tariff classification. The starting point for an examination of the meaning of this word lies in the case of DFC of T v Polaroid Australia Pty Ltd (1971) ATC 4249; (1971) ALJR 32; (1971) 2 ATR 653, where in determining whether Polaroid film packs and picture rolls were accessories to a Polaroid camera, Gibbs J at page 4253 held: 

The final question is whether the goods can be described as accessories for a camera. The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependant upon it. . In my opinion, however, the goods in question cannot be regarded as accessories for a Polaroid camera. An accessory for a camera is an extra and additional part of the equipment of the camera itself, such as a light meter, a filter or a wide angle lens, and in the ordinary course of language a film would not be referred to as an accessory for a conventional camera, nor a film pack or a picture roll as an accessory for a Polaroid camera.

It is conceded that an item does not have to be attached to the primary object for it to be considered an accessory (see Federal Commissioner of Taxation v Kentucky Fried Chicken Pty Ltd & Anor (1988) 88 ATC 4363; (1988) 19 ATR 1141). Further, an item does not have to contribute to the functioning of the primary object for it to be an accessory, for example a car mat and car (see Walterscheid Australia Pty Ltd v Collector of Customs (1988) 14 ALD 785; (1988) 7 AAR 555). However, it is also clear that there must be a relationship of dominance and subordinance between the primary object and its accessory. Thus two separate devices, each performing a separate and distinct function of an equally crucial nature, will not be accessories to each other despite the fact that one function must take place first before the second can occur.

From the dictionary definitions and case law cited above, it is considered that your products are not accessories for a respirator, because the products do not form an extra or additional part of the respirator itself nor are the products dependant upon, or auxiliary or subordinate to the respirator. The products are entirely separate to the respirator and they perform a completely distinct function from that of respiration. The products are intended for use by persons convalescing.

Therefore, your products are not covered by item 127 in Schedule 3 to the GST Act.

Furthermore, upon examining Schedule 3 to the GST Act, we confirm that your products are not covered by any other items listed under 'Respiratory appliances', 'Respiratory appliances - other products for those with breathing difficulties, or any other categories listed in Schedule 3 or the corresponding regulations.

Therefore, your products do not meet the first requirement of subsection 38-45(1) of the GST Act and will not be GST-free. Accordingly, we will not need to consider the other requirements of section 38-45 of the GST Act.

In accordance with section 13-10 of the GST Act, your importation of the products into Australia will be a taxable importation.

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