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Edited version of your written advice

Authorisation Number: 1013069121009

Date of advice: 23 August 2016

Ruling

Subject: GST and medical aids and appliances

Questions

Answers

Relevant facts and circumstances

You are registered for GST.

You will import a product which is manufactured in a pharmaceutical facility outside the indirect tax zone.

The product is an adhesive gel used on the skin.

The product is registered with the Therapeutic Goods Administration (TGA) as a medical device.

The product is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability.

You will sell the product to individuals through the internet, and to clinicians, pharmacies, hospitals, clinics and distributors.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 13-10 and

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

Reasons for decisions

Sale of the product

Subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of a medical aid or appliance is GST-free if:

Covered by Schedule 3 or specified in the Regulations and is specifically designed for people with an illness or disability

Item 8 in Schedule 3 to the GST Regulations (item 8) lists skin bond as specified medical aids and appliances for the purpose of paragraph 38-45(1)(a) of the GST Act.

"Skin bond' is not defined in the GST Act or GST Regulations. The Macquarie Dictionary Online defines 'bond' as:

noun 1.  something that binds, fastens, confines, or holds together.

Therefore, a "skin bond" is something that binds, fastens, confines the skin or holds the skin together.

The product is an adhesive gel that bonds the skin; and thus, is a skin bond. Accordingly, the product is covered by item 8. Paragraph 38-45(1)(a) of GST Act is satisfied.

Specifically designed for people with an illness or disability and 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 product bonds the skin and is used in conjunction with a therapy for a certain disorder. As such, we consider that the product 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)(b) of the GST Act is satisfied. Therefore, the supply of the product is GST-free.

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 unless the supplier and the recipient agree that the supply not be treated as GST-free. Accordingly, your sale of the product to individuals, clinicians, pharmacies, hospitals, clinics and distributors is GST-free.

Importation of the product

Section 13-5 of the GST Act provides that you make a taxable importation if 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.

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

As discussed above, your sale of the product is GST-free; thus, if the importation had been a supply, it would have been GST-free. Therefore, your importation of the product is a non-taxable importation under paragraph 13-10(b) of the GST Act.

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