Edited version of private ruling

Authorisation Number: 1011702690510

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Ruling

Subject: GST and breathing aids

Question

Is GST payable on the sale of products used as breathing monitoring devices?

Answer

Yes, GST is payable on the sale of the supplies of the breathing monitoring devices.

Relevant facts and circumstances

You are registered fro GST.

You are a supplier of medical technology through aids and appliances.

You supply breathing monitoring devices.

These devices are used by persons to monitor their breathing.

The devices are sold on both the wholesale and retail markets.

The products are sold directly to the public and private hospitals through pharmaceutical wholesalers and to distributor parties that on sell to hospitals.

The products are designed to pick up symptoms of wheeze and cough or cough, particularly in patients with asthma, COPD and Vocal Chord Dysfunction.

The products must be used in conjunction, and on the recommendation of a health care professional.

The products are marketed as "should be used under the direction of a physician or healthcare professional to monitor conditions such as asthma", and as "technology aimed at the emergency medicine and intensive care units, focusing on injecting sounds into the thorax etc."

Detailed reasoning

GST is payable on taxable supplies.

You make a taxable supply when you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which 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 Australia; 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.

In your case, you satisfy the conditions at paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act. That is you are supplying the medical equipment in question for consideration, and in the course or furtherance of an enterprise that you carry on. These supplies are connected with Australia, and you are registered for GST. There are no provisions in the GST Act or under any other Act under which these supplies are input taxed. Therefore, what remains to be determined is whether you are making GST-free supplies.

Medical aids and appliances

Section 38-45 of the GST Act provides for GST-free treatment for sales of certain medical aids or appliances, and their spare parts.

Under subsection 38-45(1) of the GST Act 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.

In accordance with sub regulation 38-45.01(1) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), a medical aid or appliance is specified in the regulations if it is covered by Schedule 3 to the GST Regulations.

Note that in accordance with section 182-15 of the GST Act, and sub regulation 38-45.01(2) of the GST Regulations, the second column of the table in Schedule 3 to the GST Act and the second column of the table in Schedule 3 to the GST Regulations are not operative. In order for a medical aid or appliance to be 'covered by Schedule 3 to the Regulations', for the purposes of paragraph 38-45(1)(a) of the GST Act, it must be one or more of the items listed in the third column of the table in Schedule 3 to the GST Act or third column of the table in Schedule 3 to the GST Regulations.

There are no items in Schedule 3 to the GST Regulations that apply to the breathing monitoring devices that you supply.

The only item in Schedule 3 to the GST Act which the breathing monitoring devices may potentially come within the terms of, is item 37. Item 137 specifically states the medical aid or appliance must be a "breathing monitor". Accordingly, where a breathing monitor is specifically designed for people with an illness or disability and not widely used by people without an illness or disability, it will be a GST-free supply.

A "breathing monitor" is not defined in the GST Act. It is also not defined in Stedmann's Medical Dictionary. In the absence of a definition, an item takes on the technical meaning given to it in the industry in which it operates. It is generally accepted in the Health Industry that a "breathing monitor' monitors breathing during anaesthesia.

The promotional material for the breathing monitoring devices states that the items are designed to pick up symptoms of wheeze and cough or cough, particularly in patients with asthma, COPD and Vocal Chord Dysfunction. These are not considered to be the same function as a breathing monitor. They are not machines of this kind.

Based on the promotional material, the breathing monitoring devices are not designed to monitor a patient's breathing during anaesthesia. A breathing monitor can be used when a patient is unconscious or heavily sedated.

In this situation, although the items provide various measurements of breathing, measuring a patient's breathing in circumstances where monitoring is of assistance, for example, where the patient is unconscious or under anaesthetic is not their primary purpose.

The items are used to measure characteristics of breathing at particular times rather than continuously monitor breathing.

Therefore, for the purposes of the GST Act, the breathing monitoring devices are not covered by item 137 of Schedule 3 of the GST Act. As such, the supply of the breathing monitoring devices does not satisfy the first requirement of subsection 38-45(1) of the GST Act. Therefore, they are not a GST-free supply under section 38-45 of the GST Act.

There are no other provisions of the GST Act or any other Act, under which your supply of these items is GST-free.

Accordingly, as all the requirements of section 9-5 of the GST Act are satisfied, your supplies of these items are taxable, and GST is payable on these supplies.