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Edited version of your written advice
Authorisation Number: 1051310763895
Date of advice: 21 November 2017
Ruling
Subject: GST-free chairs
Questions
1. Is the supply of chair 1 GST-free?
2. Is the supply of chair 2 GST-free?
Answers
1. Yes, the supply of chair 1 is GST-free.
2. Yes, the supply of chair 2 is GST-free.
Relevant facts and circumstances
You sell two types of chairs (the chairs). The chairs are:
The chairs have the following features:
1. adjustable in height so as to attain the correct seating position for the requirements of the individual
2. adjustable back angle to enable proper support (other than simply reclining) and contain appropriately positioned/shaped back supports
3. side supports
4. adjustable seat height and depth
5. adjustable seat base angle
6. wide arm rests
7. fitted with wheels, glides or a mobile base suitable for movement of disabled people
8. suitable hand grips for disabled people
9. specific features to enable people with difficulties in rising to get in and out of the seating
10. pressure reducing cushions.
In addition to the above features, one of the chairs has seats that have adjustable air cushions which provide pressure relief and four way material which reduces the effects of shearing and friction on the users’ skin.
The chairs are specifically designed for people with an illness or disability. The chairs are designed to aid pressure relief and comfort for prolonged sitting.
You sell the chairs to aged care facilities and hospitals. You do not sell the chairs to the general public.
Relevant legislative provisions
Subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
Section 9-5 of the 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 the Indirect Tax Zone; 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)
In this case, you make a supply for consideration in the course of your enterprise. The supply is connected with the Indirect Tax Zone and you are registered for GST. Further, the supply does not fall within any provision of the GST Act which would be input taxed. Therefore, what remains to be determined is whether your supply is GST-free.
Relevantly, subsection 38-45(1) of the GST Act outlines the circumstances in which the supply of certain medical aids and appliances will be GST-free and states:
38-45 Medical aids and appliances
(1) 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.
Subsection 38-45(1) of the GST Act essentially sets out three elements, all of which must be satisfied before a supply can be considered GST-free. These are the supply must be:
● listed in the table in Schedule 3 to the GST Act or 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.
Listed in the table in Schedule 3 to the GST Act or the GST Regulations
The relevant item to consider in this case is Item 16 of Schedule 3 of the GST Regulations which specifies ‘postural support seating’ as a medical aid or appliance for the category listed as ‘Mobility of people with disabilities – physical: seating aids’.
The phrase ‘postural support seating’ is not defined in the GST Act.
ATO Interpretive Decision ATO ID 2001/364: GST and the supply of an orthopaedic chair (ATO ID 2001/364) states as follows:
Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).
The GST Pharmaceutical Health Forum – issues register – attachment B – schedule 3 – medical aid or appliance provides that in order to satisfy the description in item 16 and be considered to be specifically designed for people with an illness or disability, postural support seating should be:
1. Custom made to suit the particular persons anatomical shape in order to provide correct postural support; or
2. Adjustable to such an extent that the product can be customised to the individual's body shape or size in order to provide correct postural support; or
3. Incorporate several of the following design characteristics which will ensure the product provides the necessary postural support for people with an illness or disability:
1. adjustable in height so as to attain the correct seating position for the requirements of the individual
2. adjustable back angle to enable proper support (other than simply reclining) and contain appropriately positioned/shaped back supports
3. adjustable or appropriately shaped/sized lumbar support
4. side supports
5. adjustable seat height and depth
6. adjustable seat base angle
7. calf support
8. adjustable shoulder and trunk supports
9. footrests specifically designed for injured or disabled persons
10. swing away arms or removable armrests
11. wide arm rests
12. integral push handles
13. specifically designed to provide a correct sitting position that results in sitting firmly on the pelvic bones and that aligns and lifts the head, neck and back
14. fitted with wheels, glides or a mobile base suitable for movement of disabled people
15. locking brakes
16. suitable hand grips for disabled people
17. specific features to enable people with difficulties in rising to get in and out of the seating
18. pressure reducing cushions.
Additionally the product must not be widely used by people without an illness or disability. This test is a use test but it is very difficult to determine actual usage of individual products. An indication of actual usage can be gained from the classes of people to whom they are sold and the marketing strategies of the distributors/sellers of the products. Historical data based on sales is an acceptable indicator of usage however this may not be available for new and innovative products. In these situations estimates by manufacturers based on sales of similar categories of products may be considered.
The chairs cover several of the characteristics from point 3 above. As such these products will fall within postural support seating as set out in the GST Act and GST Regulations.
Specifically designed for people with an illness or disability and are sold
The chairs are designed to aid pressure relief and comfort for prolonged sitting and therefore are specifically designed for people with an illness or disability.
Not widely used by people without an illness or disability
The chairs are only sold to aged-care facilities and hospitals and are not widely used by people without an illness or disability.
Consequently, the supply of the chairs meets all of the requirements listed in subsection 38-45(1) of the GST Act. As such, the supply of the chairs is GST-free under subsection 38-45(1) of the GST Act.
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