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Ruling

Subject: GST classification of needles and syringes

Question 1

Are the supplies of needles and syringes you make to pharmacies and health professionals goods and services tax (GST) free?

Answer

Yes, the supplies of needles and syringes you make to pharmacies and health professionals are GST-Free under item 37 in schedule 3 of subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

You are a wholesaler of medical equipment for the health industry.

You supply needles and syringes to retail outlets including pharmacies, health professionals and diabetes Australia.

The needles and syringes are used by people who are ill and also supplied to drug users.

The needles are connected to the syringe in a single use product.

The end users are people with an illness including those with a drug habit.

The health professionals and pharmacy's on-sell the needles syringes in their facilities to help their patients.

You are aware of the GST-free status for supplies of needles and syringes made to Diabetic Australia.

You provided Medical aids or appliances (NAT 4651) and would like clarification on how to read the third column set out in Schedule 3 of the GST Act.

It states:

MEDICAL AIDS OR APPLIANCES LISTED IN AN

UNEXPECTED CATEGORY

Schedule 3 to the GST Act contains three columns made up of

the item number, the category and the medical aid or appliance.

If the meaning of the medical aid or appliance listed in the third

column is unclear, you can use the category column to clarify it.

in schedule 3.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-30(1).

A New Tax System (Goods and Services Tax) Act 1999 Section 38-45.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(2).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(3).

A New Tax System (Goods and Services Tax) Act 1999 Schedule Sch3.

Reasons for decision

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

· it 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

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

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

Once a supply of a medical aid or appliance meets the requirements of subsection 38-45(1) of the GST Act, the supply is GST-free all the way down the supply chain and not only when supplied to a person with an illness or disability.

Item 37 of Schedule 3 to the GST Act lists 'needles and syringes'.

This item appears under the second column category heading 'Diabetes'.

The GST Act provides clarification on the legislative effect of category headings in Schedule 3 to the GST Act.

Section 182-15 of the GST Act states that the second column of the table in Schedule 3 to the GST Act is not operative. In interpreting an item in the table this column may only be considered for a purpose for which an explanatory section may be considered under subsection 182-10(2) of the GST Act. That is, the category heading in the second column of Schedule 3 to the GST Act may only be considered in interpreting an operative provision:

 - in determining the purpose or object underlying the provision; or

- to confirm that the provision's meaning is the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision; or

- in determining the provision's meaning if the provision is ambiguous or obscure; or

- in determining the provision's meaning if the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision, leads to a result that is manifestly absurd or is unreasonable.

For example, for the purposes of Item 37, it is considered that the meaning of the term 'needles and syringes' is sufficiently clear such that it is not necessary to consider the category heading in column two, 'Diabetes'. That is, the interpretation of the term 'needles and syringes' is not restricted by the category heading, 'Diabetes'. Therefore, it is not only needles and syringes for use by diabetics which fall within Item 37.

However, it is considered that the individual items 'needles' and 'syringes' must be interpreted by reference to the fact that they are listed together as one item. On this basis, it is considered that a needle that is not designed for use with a syringe, or a syringe that is not designed for use with a needle will not be covered by Item 37.

In this case you informed that the needles and syringes are sold to retail outlets including pharmacies, health professionals and diabetes Australia for the purpose of providing clean safe administration of drugs to all patients.

The needles and syringes are listed in Schedule 3 to the GST Act and the needles and syringes are for use by people with an illness or disability and are not to be widely used by people who do not have an illness or disability.

Therefore, despite their unintended use by drug users, the supplies of the needles and syringes will be GST-free under subsection 38-45(1) of the GST Act.