ATO Interpretative Decision
ATO ID 2001/567
Goods and Services Tax
GST and diagnostic external programmable cardiac stimulatorsFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a diagnostic external programmable cardiac stimulator?
Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a diagnostic external programmable cardiac stimulator. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of medical appliances. The entity supplies diagnostic external programmable cardiac stimulators to other entities.
The diagnostic external programmable cardiac stimulator is used by or under supervision of a cardiologist.
The diagnostic external programmable cardiac stimulator is used to perform diagnostic tests to investigate various heart conditions, such as arrhythmias. It does this by stimulating the heart into simple and complex patterns to detect any heart condition.
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
Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance:
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- is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations);
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- is specifically designed for people with an illness or disability; and
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- is not widely used by people without an illness or disability.
To be GST-free as a medical aid or appliance one of the requirements is that the product in question must be covered in Schedule 3 or specified in the GST Regulations. The diagnostic external programmable cardiac stimulator is not specifically covered in Schedule 3 or specified in the GST Regulations.
However, heart monitors are listed at Item 1 of the table to Schedule 3 (Item 1). In addition, pacemakers are listed at Item 2 of the table to Schedule 3 (Item 2). Therefore, the issue is whether Item 1 or Item 2 covers the diagnostic external programmable cardiac stimulator.
Heart monitors and pacemakers are not defined in the GST Act. 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 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 terms 'heart monitors' and 'pacemakers' must be defined in the context in which they appear. In this case, they have a special or technical meaning.
Heart monitors
Steadman's Medical Dictionary, 1999, Lippincott Williams & Wilkins, United States of America defines a cardiac (heart) monitor to mean, 'an electronic monitor which, when connected to the patient, signals each heart beat with a flashing light, an electrocardiographic curve, an audible signal, or all three'.
As such, a device with the primary function of monitoring a patient's heartbeat is a heart monitor, and is covered by Item 1.
In this case, the primary function of the diagnostic external programmable cardiac stimulator is to stimulate the heart into simple or complex patterns to diagnose heart conditions.
It is not a heart monitor as its primary function is something other than monitoring a patient's heartbeat.
As such, the diagnostic external programmable cardiac stimulator is not covered under Item 1.
Pacemakers
Steadman's Medical Dictionary defines a 'pacemaker' to include the following meaning, '... an artificial regulator of rate activity...'
The word 'regulator' is defined in The Macquarie Dictionary, 1997, The Macquarie Library Pty Ltd, Macquarie University, New South Wales as '...that which regulates...'. The word 'regulates' is defined in The Macquarie Dictionary to include the following meaning, '...to control or direct by rules, principle, method...to adjust to some standard or requirements....'
As such, a pacemaker is an artificial item which controls and directs the heart into a set standard of rate activity.
In this case, the diagnostic external programmable cardiac stimulator stimulates the heart into simple and complex patterns for the purpose of diagnosing various heart conditions. It does not regulate the heart into a set standard of rate activity.
Therefore, the diagnostic external programmable cardiac stimulator is not covered under Item 2.
Item 1 or Item 2 does not cover the diagnostic external programmable cardiac stimulator. As such, the entity is not a making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies diagnostic external programmable cardiac stimulators.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, in this case the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.
Date of decision: 5 September 2001
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
subsection 38-45(1)
Division 38
Division 40
Other References:
Steadman's Medical Dictionary, 1999, Lippincott Williams & Wilkins, United States of America.
The Macquarie Dictionary, 1997, The Macquarie Library Pty Ltd, Macquarie University, New South Wales
Keywords
Goods and services tax
GST-free
Section 38-45 - medical aids & appliances
ISSN: 1445-2782