Edited version of private advice

Authorisation Number: 1052252030725

Date of advice: 15 May 2024

Ruling

Subject: GST - supply of compression garments

Question 1

Is your supply of 'medical compression stockings' GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Your supply of medical compression stockings is GST-free under subsection 38-45(1) of the GST Act, where the stocking is designed for people with an illness or disability and is not widely used by people without an illness or disability.

Your supply of medical compression stockings is not GST-free under subsection 38-45(1) of the GST Act, where the stocking is designed, or widely used by people in the general community, merely for the prevention of an illness or disability. The supply of these medical compression stockings is a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

This ruling applies for the following period:

xx May 20xx to xx May 20xx

The scheme commenced on:

xx July 20xx

Relevant facts and circumstances

You are a retailer and distributer of medical aids.

You are registered for GST.

You supply a range of compression garments to Australian recipients, including compression stockings.

The subject of this private ruling is a series of medical compression stockings (the 'medical compression stockings').

You advertise these products as medical compression stockings, for use as a treatment of impaired venous or lymphatic function.

You supply the products to retail stores that offer medical compression stocking measuring services. You also supply the products directly to retail consumers.

You make a distinction in your marketing materials between medical compression stockings and support stockings.

You provide instructions for use (IFU) for each product. The IFUs contain standardised representations that the product should be used in accordance with your indications.

Each product is classified against a range of compression standards.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

•         section 9-5

•         section 38-45

A New Tax System (Goods and Services Tax) Regulations 2019

•         section 38-45.01

Reasons for decision

Section 9-5 of the GST Act provides that 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.

Subsection 38-45(1) of the GST Act provides that a supply of a medical aid or appliance is GST-free if:

(a)  it is covered by Schedule 3 to the GST Act or specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST 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.

Medical aid covered by the GST Regulations

For the purposes of paragraph 38-45(1)(a) of the GST Act, item 7 of the table in subsection 38-45.01(1) of the GST Regulations specifies a 'compression garment.'

Your medical compression stockings are designed to be worn and exert compression on the body, and therefore fall within the meaning of a 'compression garment.' Accordingly, your medical compression stockings satisfy paragraph 38-45(1)(a) of the GST Act.

Medical aid specifically designed for, and not used by people without, an illness or disability

To satisfy paragraph 38-45(1)(b) of the GST Act, a compression garment must be both:

•         specifically designed for people with an illness or disability; and

•         not widely used by people without an illness or disability.

Compression garments that are designed, or widely used by people in the general community, merely for the prevention of illness or disability will not satisfy the requirements of paragraph 38-45(1)(b) of the GST Act. This includes compression garments designed for, or widely used by, people:

•         who stand for long periods of time to prevent legs becoming sore or swollen;

•         who are pregnant to lessen swollen feet and legs and water retention; or

•         for general prevention of deep vein thrombosis (e.g. by people travelling on long flights).

You describe the indications or therapeutic uses of some of your products as as being for the treatment of tired and heavy legs, as well as the prevention of varicosis.

Therefore, we consider those medical compression stockings do not satisfy the requirements of paragraph 38-45(1)(b) of the GST Act. Accordingly, your supply of those medical compression stockings is not GST-free under subsection 38-45(1) of the GST Act. Your supply of those products is a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

You describe the indications or therapeutic uses of some of your products as being for the treatment of serious conditions and to assist with healing.

We take the view that these medical compression stockings are designed for people with an illness or disability and are not widely used by people without an illness or disability. Accordingly, these medical compression stockings satisfy paragraph 38-45(1)(b) of the GST Act.

GST-free supply

Your supply of medical compression stockings designed for people with an illness or disability, and not widely used by people without an illness or disability, is therefore GST-free under subsection 38-45(1) of the GST Act.

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