Edited version of your written advice

Authorisation Number: 1012758142691

Ruling

Subject: GST and supply of installation of tracking for ceiling Hoist.

Question

Is the installation of Ceiling Hoist and Tracking including the accessories GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes, the installation of Ceiling Hoist and Tracking including the accessories will be GST-free if the installation is integral, ancillary or incidental to the supply of the Ceiling Hoist and Tracking. Please refer to the reasons for decision for details.

Relevant facts and circumstances

• You are carrying on an enterprise of supplying medical equipment including Ceiling Hoist and Tracking and registered for goods and services tax (GST).

• You supply Ceiling Hoist and Tracking to nursing homes, aged care centres, hospitals and directly to people with disability. You also supply the installation of these medical aids or appliances.

• You treat the supply of Ceiling Hoist and Tracking as a GST-free supply as per Item 88 in the table in Schedule 3 of the GST Act and the supply of installation as a taxable supply.

• You have arrangements with a State Government to supply Ceiling Hoist and Tracking to patients and paid by them.

• The State Government does not pay for the installation and the patients are liable to pay for the installation cost.

• Your competitors are treating both the supply of Ceiling Hoist and Tracking and its installation as GST-free supplies.

Relevant legislative provisions

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

Reasons for decision

Under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) the supply of a medical aid or appliance is GST-free where the medical aid or appliance:

• is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations),

• is specifically designed for people with an illness or disability, and

• is not widely used by people with an illness or disability.

Medical aids or appliances which satisfy all the elements of subsection 38-45(1) of the GST Act are GST-free at all stages of the supply chain. The supply is GST-free no matter who makes the supply or to whom the supply is made.

You have advised that this ruling request relates specifically to the treatment of GST to the installation cost and accessories when you supply the Ceiling Hoist and Tracking. Currently, you are treating the supply of installation as taxable and the supply of Ceiling Hoist and Tracking as GST-free.

Installation

The GST Act does not provide for the supply of labour services in relation to medical aid and appliance to be GST-free. For example, labour for the installation of a GST-free medical aid or appliance that is not provided by the supplier of the medical aid or appliance, or that is provided by the same supplier but in a later transaction that is distinct and separate to the supply of the medical aid or appliance, does not form part of the GST-free supply of the medical aid or appliance and is not GST-free under subsection 38-45(1) of the GST Act.

However, where the medical aid or appliance is supplied together with a labour component as part of one single transaction, the GST treatment of that transaction will depend on how the supply is characterised. A supply of a medical aid or appliance together with a labour component may be characterised in one of three ways:

1. The main supply is the GST-free medical aid or appliance and the labour is integral, ancillary or incidental to that main supply. In this case there is a single GST-free supply of a medical aid or appliance (which includes the labour); or

2. The main supply is the labour (as is usually the case for repair work) and the GST-free medical aid or appliance (or most commonly, its GST-free spare part) is integral, ancillary or incidental to that main supply. In this case there is a single taxable supply of labour and the GST-free aid/appliance or spare part also taxable; or

3. There are separately identifiable supplies of GST-free medical aid or appliances and labour, neither of which is integral, ancillary or incidental to the other. In this case the supplies are partly taxable and partly GST-free and must be apportioned on a reasonable basis.

What does integral, ancillary or incidental mean?

Goods and Services Tax Ruling GSTR 2001/8 provides guidance in determining whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply.

The following points would indicate that part of a supply is integral, ancillary or incidental to the dominant part of the supply:

• it represents a marginal proportion of the total value of the package compared to the dominant part,

• it is necessary or contributes to the supply as a whole but cannot be identified as the dominant part of the supply,

• it contributes to the proper performance of the contract to supply the dominant part, and

• a supplier would reasonably conclude that it does not constitute for customers an aim in itself but is a means of better enjoying the dominant thing supplied.

The supply of the labour by itself would a taxable supply. However, where there is single supply of a fully functioning Ceiling Hoist and Tracking, it is considered that there is a composite supply, the dominant part of which is a supply of the Ceiling Hoist and Tracking. The labour is part of that composite supply and it would not be necessary to apportion the supply into taxable or non-taxable parts.

In this case, you advised that generally you supply the Ceiling Hoist and Tracking including the installation. You treat the supply of Ceiling Hoist and Tracking as GST-free and the supply of installation as a taxable supply. As explained above, if you supply both the Ceiling Hoist and Tracking along with the installation as a composite supply, the whole supply will be GST-free provided the dominant part of the supply is GST-free.

You advised that you also supply Ceiling Hoist and Tracking to patients under the arrangement with the State Government where you receive payments for the supply from them. However, the patients are liable for the installation costs and the State Government does not pay for the installation cost.

In this situation, although the recipient of the supply would be the patients you will be making the supply to the State Government under the arrangement. The ATO refers this arrangement as tripartite arrangement and Goods and Services Tax Ruling 2006/9 explains it in details. Since the supply of Ceiling Hoist and Tracking is GST-free under subsection 38-45(1) of the GST Act, the supply made to the State Government and provided to the patients will be GST-free.

However, the supply of installation was not made to the State Government under the arrangement and it was the liability of the patients to arrange the installation of the Ceiling Hoist and Tracking provided by you. The patients have the option of arranging the installation from a different supplier. Furthermore, in this instance although the installation is considered as an integral, ancillary or incidental part of the dominant supply, it was not supplied as a composite supply under a single transaction.

Therefore, it is our view that the supply of installation in this situation would be taxable as the supply was not made in a single transaction.

Conclusion

The supply of installation of Ceiling Hoist and Tracking along with any accessories will be GST-free under subsection 38-45(1) of the GST Act provided the dominant supply of Ceiling Hoist and Tracking is made as a composite supply under a single transaction.

Where the supply of installation is a separate supply to the supply of the GST-free Ceiling Hoist and Tracking, the supply of installation is a taxable supply and subject to GST.

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