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Ruling

Subject: GST and supply of medical aids

Questions

1. Will your supply of reusable medical aids (the products) a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

2. Will you, as the importer of the products, be making a taxable importation under section

13-5 of the GST Act?

Answers

1. Yes, your supply of the products will be GST-free under section 38-45 of the GST Act.

2. No, you will not be making a taxable importation under section 13-5 of the GST Act.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are a supplier of medical aids and appliances.

You will be importing reusable medical aids (the products) and sell them through your website.

The products are absorbent. They have been specifically designed for people suffering from a medical condition and are not widely used by people without such disorder.

The products are worn by people to manage a medical condition. They have been manufactured using multi-layer absorbency technology. The upper layer consists of a moisture wicking layer with micro channels wicking moisture away. The absorbent middle layer locks liquid inside and prevents bad odours. The bottom layer is waterproof, breathable, and prevents allergens and bacteria. They are reusable and can be washed multiple times.

You will be importing the products from the manufacturer, a specialist in textile based products outside Australia.

You will not have agreements with the recipients of the products that the supply will not be GST-free.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5,

A New Tax System (Goods and Services Tax) Act 1999 section 13-5 and

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

Reasons for decision

1. GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or input taxed.

(*denotes a term defined under section 195-1 of the GST Act).

Based on the information provided, you will supply the products for consideration and in the course of carrying on your enterprise. The supply will be connected with Australia as you will import the products and make them available to the recipients in Australia. Furthermore, you are registered for GST. Thus, the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act will be satisfied. Accordingly, your supply of the products will be a taxable supply unless the supply is GST-free or input taxed.

There is no provision in the GST Act under which your supply of the products will be input taxed. However, the supply of your products may be GST-free under section 38-45 of the GST Act.

Subsection 38-45 (1) of the GST Act provides that 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.

Paragraph 38-45(1)(a) - covered by Schedule 3

Item 18 of Schedule 3 to the GST Act (item 18) lists disposable/reusable medical aids required (excluding nappies for babies, sanitary pads or tampons) as specified medical aids and appliances for the purpose of paragraph 38-45(1)(a) of the GST Act.

The products that you will supply are reusable and are worn to manage a medical condition. As such, the products are covered by item 18. The requirement in paragraph 38-45(1)(a) of the GST Act will be satisfied.

Paragraph 38-45(1)(b) - specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability

A medical aid and appliance is specifically designed for people with an illness or disability if it is created with the intention of having certain features or characteristics that would be of benefit to the people with an illness or disability.

In determining whether the products are 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) of the GST Act 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 the product.

In this case, the products are described as being made of materials that could absorb different amounts of liquid. They are advertised as products for managing a medical illness. As such, it is considered that the products are specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability. The requirement in paragraph

38-45(1)(b) of the GST Act will also be satisfied.

Therefore, your supply of the products will be GST-free under subsection 38-45(1) of the GST Act.

It should be emphasised that items which are GST-free under subsection 38-45(1) of the GST Act are GST-free at all points in the supply chain.

Subsection 38-45(3)

In accordance with subsection 38-45(3) of the GST Act, a supply is not GST-free under subsection 38-45(1) if the supplier and the recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies.

You advised that you will not have an agreement with the recipients not to treat your supply of the products as GST-free. Thus, subsection 38-45(3) of the GST Act will not apply.

2. According to section 13-5 of the GST Act, you make a taxable importation if:

(a) goods are imported; and

(b) 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.

In this case, the products will be imported; and, as the importer, you will enter the products for home consumption. As paragraphs 13-5(a) and 13-5(b) of the GST Act will be satisfied, you will be making a taxable importation when you import the products unless the importation is a non-taxable importation.

Section 13-10 of the GST Act provides that 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.

As discussed above, the supply of the products will be GST-free under section 38-45 of the GST Act. Therefore, if the importation had been a supply, it would have been a supply that was GST-free. Accordingly, the importation of the products is a non-taxable importation under paragraph 13-10(b) of the GST Act.

You, as the importer, will not be making a taxable importation under section 13-5 of the GST Act.

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