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Edited version of private advice
Authorisation Number: 1012650368984
Ruling
Subject: Goods and services tax (GST) and supplies of medical products
Question
Are your supplies of the medical products GST-free?
Answer
Yes.
Relevant facts and circumstances
• You are an Australian company which is registered for GST.
• You manufacture and sell a range of medical devices.
• You manufacture and will sell advanced wound care products known by certain names ('the products') to customers in Australia.
• The products have certain characteristics
• The products have certain components. The products contain certain things
• A certain condition has certain characteristics, a wound.
• The products are intended for advanced wound care.
• The products help improve health and reduce a certain health problem.
• The products assist the health of a particular organ by certain means that support healing and prevent further health problems. When applied to the organ, the products have certain health benefits.
• The products are regulated by the Australia Therapeutic Goods Administration as a type of dressing.
• The products are distributed to primary health care specialists predominantly a certain type of health professional.
• The products are only marketed to clinicians or people with a disability or illness.
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 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 Schedule 3
Reasons for decision
Summary
You supplies of the products are GST-free supplies of medical aids/appliances.
Detailed reasoning
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 defined term in section 195-1 of the GST Act)
The supply of the products will be taxable if all the requirements in section 9-5 of the GST Act are satisfied.
From the facts given, your supply of the products satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act, as follows:
(a) you make the supplies of the products for consideration by way of payments;
(b) you make the supplies of the products in the course or furtherance of your business;
(c) the products are supplied in Australia through an enterprise that you carry on in Australia (and therefore the supplies are connected with Australia); and
(d) you are registered for GST in Australia.
However, section 9-5 of the GST Act also provides that the supply is not taxable to the extent that it is GST-free or input taxed.
There are no provisions in the GST Act under which your supplies of the products would be input taxed.
Therefore, what remains to be determined is whether your supplies of the products are GST-free.
GST-free supply
A supply of a medical aid and appliance is GST-free if it satisfies the requirements in subsection 38-45(1) of the GST Act.
Subsection 38-45(1) of the GST Act states:
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) of the GST Act
The first requirement under subsection 38-45(1) of the GST Act is that the product must be covered by Schedule 3 to the GST Act or the GST regulations.
The first five items in Schedule 3 to regulation 38-45.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) are listed under the category of advanced wound care. The advanced wound care products must consist of, or predominantly consist of, one of the five items below:
• Alginate
• Hydro colloids
• Hydro gel
• Polyurethane film
• Polyurethane foam
You advised us that the products will be sold as advanced wound care products. A certain condition has certain characteristics, a wound. The products are intended for advanced wound care.
The products assist the health of a particular organ by certain means that support healing and prevent further health problems. When applied to the organ, the products have certain health benefits.
The products are regulated by the Australia Therapeutic Goods Administration as a type of dressing.
A certain type of advanced wound care substance listed in Schedule 3 to the GST Regulations has certain characteristics. Your products have those characteristics. Therefore, your products are one of the types of advanced wound care substances listed in Schedule 3 to the GST Regulations.
As the products are advanced wound care products and one of the types of advanced wound care substances listed in Schedule 3 to the GST Regulations, the first criterion in paragraph 38-45(1)(a), is satisfied.
The products are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Therefore, you meet the requirement of paragraph 38-45(1)(b) of the GST Act.
As you meet the requirements of subsection 38-45(1) of the GST Act, your supplies of the products are GST-free. Hence, your sales of these products are not taxable supplies. Therefore, GST is not payable on your sales of the products.
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