Edited version of private ruling

Authorisation Number: 1011882225908

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Ruling

Subject: GST and medical appliances

Question

Are you, 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 you supply medical device kits developed primarily for the relief of chronic pain?

Answer

Yes, you are making a GST-free supply under subsection 38-45(1) of the GST Act when you supply the medical device kits primarily for the relief of pain.

Relevant facts

You are a supplier of medical appliances and are registered for goods and services tax (GST).

You acquire and import medical device kits from overseas.

The medical device is a device which transmits electrical impulses through a generator that interferes with the nerve impulses that causes chronic pain to the patients.

The medical device interrupts pain signals before they reach the brain. It provides patients a relief from or a reduction of their chronic pain to an affected area of the body.

The patients have control of the operation of the device through a remote control unit.

The medical device kits will be sold to various customers, including hospital and medical practitioners.

Reasons for decision

Under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the supply of certain medical aids and appliances is GST-free where the medical aid or appliance:

· 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)

· is specifically designed for people with an illness or disability, and

· is not widely used by people without an illness or disability.

In considering whether the medical device was covered by an item in Schedule 3, particular consideration was given to whether the SCS system was covered by item 110 'Patient controlled analgesia' or item 141 'Transcutaneous nerve stimulator machines'. This particular medical device is not specified in the Regulations.

Patient controlled analgesia

The term 'patient controlled analgesia' means a device containing pain relief medication which can be self administered by the patient. When the patient feels pain, they press a button to inject the medicine through an Intravenous (IV) tube into their veins. It is not considered that the medical device is a system for administering pain-killing drugs.

Transcutaneous nerve stimulator machines

The phrase 'transcutaneous nerve stimulator machines' is 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 special or 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).

In this case, given the context in which the phrase appears (i.e. in a list of medical aids and appliances), the phrase is considered to have a special or technical meaning.

The Concise Medical Dictionary (1998) defines 'transcutaneous electric nerve stimulation' as:

'the introduction of pulses of low-voltage electricity into tissue for the relief of pain. It is effected by means of a small portable battery-operated unit with leads connected to electrodes attached to the skin; the strength and frequency of the pulses, which prevent the passage of pain impulses to the brain, can be adjusted by the patient. TENS is used mainly for the relief of rheumatic pain; as a method of producing pain relief in labour, it is less frequently used than epidural anaesthesia (see spinal anaesthesia), which has a much wider application for pain relief in obstetrics.'

Black's Medical Dictionary (1995) defines 'transcutaneous nerve stimulation' as:

'a method of electrical stimulation that is being used for the relief of pain, including that of migraine, neuralgia and phantom limbs. Known as TENS, its mode of action appears to have some resemblance to that of acupuncture. Several controlled trials suggest that it provides at least a modicum of relief of pain after operations, thereby reducing the amount of analgesics that may be called for.'

Based on the above definitions, it is considered that a TENS machine is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The purpose of the machine is to aid pain relief by preventing the passage of pain impulses to the brain. As such, a TENS machine only includes those devices which are developed primarily for the purpose of pain relief.

In this case, the medical device is a device which transmits electrical impulses through a generator that interferes with the nerve impulses that causes chronic pain to the patients. The primarily advantage of medical device revolves around providing patients a relief from or a reduction of their chronic pain to an affected area of the body.

The purpose of the medical device is to aid pain relief by preventing the passage of pain impulses to the brain. As such, it is similar to a TENS machine which only includes those device which are developed primarily for the purpose of pain relief.

Accordingly, the medical device is regarded as a TENS machine for the purposes of Item141 of Schedule 3.

Additionally, it is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. As such, the requirements of subsection 38-45(1) of the GST Act are satisfied.

Therefore, the supply of the medical device kits, which is developed primarily for the relief of pain, is a GST-free supply.