ATO Interpretative Decision
ATO ID 2001/216
Goods and Services Tax
GST and spare parts for medical aids and appliancesFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a supplier of parts, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a part for a GST-free medical aid, where that part is a generic component designed for various uses?
Decision
No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies a part for a GST-free medical aid, where that part is a generic component designed for various uses. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of parts. The entity is supplying a part to replace a worn component of a medical aid. The supply of the medical aid is GST-free under subsection 38-45(1) of the GST Act.
The part is generic and can be used as a part in many appliances other than the medical aid.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons For Decision
Subsection 38-45(2) of the GST Act provides that a supply of a spare part will be a GST-free supply if the spare part is:
- •
- supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and
- •
- specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.
The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'
In this case, the part is supplied to replace a worn component of a medical aid. As such, the part is considered to be a 'spare part' for the purposes of the GST Act. Furthermore, as the part is supplied as a spare part for a medical aid that is GST-free under subsection 38-45(1) of the GST Act; the supply satisfies the first requirement in subsection 38-45(2) of the GST Act.
However, as the spare part is a generic component that can be used as a spare part for many appliances, it is considered that it is not specifically designed as a spare part for the GST-free medical aid in question. Therefore, as the supply does not meet the second requirement in subsection 38-45(2) of the GST Act, the entity is not making a GST-free supply of a spare part.
In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act; the entity is making a taxable supply under section 9-5 of the GST Act.
Date of decision: 19 June 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
subsection 38-45(1)
subsection 38-45(2)
Division 40
ATO ID 2001/210
Other References:
The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.
GST Pharmaceutical Health Forum - Issue 1.g
Keywords
Goods & services tax
GST free
GST health
Medical aids & appliances
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782