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Subject: GST and GST-free medical aids and appliances
Question
Is the enema, suppository and applicator product GST-free pursuant to section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
Relevant facts and circumstances
Entity A sponsors an enema product in Australia under licence from overseas suppliers. The product is supplied to retail pharmacies and hospital pharmacies in Australia.
The product comes in the form of suppositories and retention enemas and is used to provide local corticosteroid treatment for rectal and rectosigmoidal disease in ulcerative colitis and Crohn's disease.
A prescription is required for the product of suppositories and retention enemas and they are approved on the TGA.
Entity A is registered for goods and services tax (GST).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-45.
Reasons for decision
GST is a broad based indirect tax payable on consumption in Australia. Generally, GST is payable on the value added at each stage of the commercial chain of dealings with goods, services and other things. The GST Act describes these dealings as supplies.
A supply will be taxable where it satisfies section 9-5 of the GST Act which provides you make a taxable supply if you make the supply for consideration, the supply is made in the course or furtherance of an enterprise that you carry on, the supply is connected with Australia, and you are registered, or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Hence, where Entity A supplies the enema, suppository and applicator product they make a taxable supply, as the supply is for consideration, the supply is made in course of an enterprise they carry on, the supply is connected to Australia as it is done in Australia and they are registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions that would result in the supply being input taxed but consideration needs to be given to if it is GST-free pursuant to section 38-45 of the GST Act.
Section 38-45 of the GST Act provides that a supply is GST-free if it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations and 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.
Enemas, suppositories, and applicators specifically designed to relieve or ameliorate constipation are listed under the continence category in Item 25 of Schedule 3 to the GST Act. It is considered that these items are specifically designed for people with an illness or disability and that these items are not widely used by people without an illness or disability.
Constipation, a condition of the bowels, is a loss of continence that is the ability to control the function of the bowel. The enema, suppository and applicator product is therefore used for the treatment of loss of continence.
Therefore, section 38-45 of the GST is satisfied and the enema, suppository and applicator product is GST-free.
A supply to a wholesaler, a retailer or an end consumer is GST-free throughout the supply chain.