Edited version of private advice

Authorisation Number: 1052462639045

NOTICE

This is an edited version of a revised private ruling. It replaces the edited version of the private ruling with the authorisation number 1012897923243.

Ruling

Subject: GST - Medical aids and appliances - Burn products

Question

Is the supply of Product X by you a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Service Tax) Act 1999(GST Act)?

Answer

No, your supply of Product X is not a GST-free supply under subsection 38-45(1) of the GST Act.

Relevant facts and circumstances

Entity A (you) is registered for GST and sells Product X.

Product X is comprised of hydro colloids.

Product X is designed to treat superficial burns, minor wounds, and superficial bedsores

Relevant legislative provisions

A New Tax System (Goods and Service Tax) Act 1999 section 9-5

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

A New Tax System (Goods and Service Tax) Act 1999 Schedule 3

A New Tax System (Goods and Services Tax) Regulations 2019 section 38-45.01

Reasons for decision

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.

If a supply of a medical aid or appliance satisfies all the requirements above, the supply is GST-free throughout the supply chain and not only when supplied to a person who has an illness or disability, unless the supplier and the recipient agree to treat the supply as if it were taxable pursuant to subsection 38-45(3) of the GST Act.

Is Product X covered by Schedule 3 or the GST Regulations?

With regards to the first requirement in paragraph 38-45(1)(a) of the GST Act, item 1 in the table to subsection 38-45.01(1) in the GST Regulations (Item 1) specifies 'hydro colloids' at paragraph (b).

Product X is comprised of a hydro colloid designed to treat superficial burns, minor wounds and superficial bedsores and as such is specified in Item 1 in the GST Regulation thereby satisfying paragraph 38-45(1)(a) of the GST Act.

Specifically designed for an illness or disability and not widely used by people without an illness or disability.

The expression 'illness or disability' is not defined in the GST Act. However, for the purpose of paragraph 38-45(1)(b) of the GST Act, we interpret an illness or disability as a personal health condition above the level of minor or trivial involving either:

•                 the impairment of some bodily function or structure; or

•                 an activity limitation resulting from an impairment involving difficulty executing everyday activities.

Personal conditions involving either of the above may result from an illness, injury or some other cause, and those conditions may be temporary, permanent, chronic or intermittent in nature.

Based on the principles outlined above, a superficial burn, minor wound, or superficial bedsore is not considered to be a personal health condition that is more than minor or trivial, as these do not result in an impairment of bodily function or structure, nor do they cause an activity limitation that affects the ability to carry out everyday tasks.

The essential character of Product X is to treat superficial burns, minor wounds and superficial bedsores which are not considered to be an 'illness or disability' for the purposes of subsection 38-45(1) of the GST Act. Accordingly, Product X is not specifically designed for people with an illness or disability because it is not designed for a burn or wound that is more than minor or trivial. Consequently, Product X is widely used by people without an illness or disability. That is, the product is used by people who have a burn or wound that is not more than minor trivial.

ATO Interpretative Decision ATO ID 2003/1102 Goods and Services Tax: GST and hydro gel based advanced burn treatment products considers (ATO ID 2003/1102) whether certain advanced burn products compromised of hydro gel are GST-free under subsection 38-45(1) of the GST Act. Particularly:

•                 non-woven medical grade dressing soaked in sterile hydro gel (hydro gel based dressing). This product is designed for use in emergency first-aid treatment of burns and is available in different sizes and shapes including a facemask.

•                 worsted wool cloth fire blanket soaked in hydro gel (hydro gel based fire blanket). This product is designed for use in serious emergencies to protect burn victims against airborne contamination and is placed on a burn wound to stabilise victims pending formal treatment.

ATO ID 2003/1102 provides that dressings and fire blankets soaked in hydro gel are GST-free under subsection 38-45(1) of the GST Act. ATO ID 2003/1102 does not apply to other burn products comprising of hydro colloids, including gel products such as Product X.

Therefore, the requirements of paragraph 38-45(1)(b) of the GST Act are not satisfied and the supply of Product X is not a GST-free supply under subsection 38-45(1) of the GST Act. The supply of Product X satisfies the requirements of a taxable supply under section 9-5 of the GST Act.

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