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Ruling

Subject: GST, medical aid and appliances

Question

Is the supply of the following products GST-free?

· Product A - Alarm clock & shaker

· Product B - Vibrating portable alarm clock

· Product C - Ring alerting system

· Product D - Vibration alerting device

Advice/Answers

The supply of the following products is taxable:

· Product A - Alarm clock & shaker

· Product B - Vibrating portable alarm clock

· Product C - Ring alerting system

· Product D - Vibration alerting device

The supply of Product C - Ring alerting system is GST-free.

Facts

You are registered for GST.

You are the importer, wholesaler and retailer of various products including the following:

· Product A -Alarm clock & shaker

This device is designed as a vibrating alarm clock and is primary used by persons suffering from various levels of low vision and/or hearing impairment.

This product is an alarm clock and telephone amplified ringer designed to provide an audible/visual and vibration alert when the phone rings or when the alarm activates.

This product can be purchased from audiologists, hearing specialists, specialist retailers and from an online store.

· Product B - Vibrating portable alarm clock

The product is available from audiologists, hearing specialists and online stores.

This product is designed as a vibrating alarm clock and will be used primarily by persons suffering from various levels of low vision and/or hearing impairment.

This product is an alarm clock designed to provide audible/visual and vibration alert.

· Product C - Ring alerting system

This device is an alerting system that is connected to an existing home phone and is supplied with a wireless doorbell push switch.

This product will be primarily used by persons suffering from various levels of low vision and/or hearing impairment.

The product is designed to provide an amplified sound, visual alert when the phone rings or the door bell is pressed.

· Product D - Vibration alerting device

The product alerts the user to incoming phone call or alarm when used with compatible products.

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 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 Section 38-45.

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

A New Tax System (GST) Regulations 1999 38-45.01.

Reasons for decision

GST is payable if an entity is making a taxable supply.

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

(* denotes a defined term in the GST Act.)

In your case, the supply of the above listed products satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act. That is, you sell the above listed products for consideration, the sale is made in the course or furtherance of your enterprise, the supply is connected with Australia and you are registered for GST. The supply of the above listed products, in the circumstances described, is not input taxed. It remains to be determined if the supply is GST-free.

Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance 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.

A supply that satisfies all the requirements in subsection 38-45(1) of the GST Act will be GST-free at all points in the supply chain. The supply remains GST-free no matter who supplies it or who the supply is made to.

In determining whether a medical aid and appliance is specifically designed for people with an illness or disability, reference should be made to the designer's/manufacturer's intention of how the good is to be used and its features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased.

In determining whether a medical aid or appliance is used by people without an illness or disability, reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased. Subsection 38-45(1) does not require the GST treatment of a medical aid or appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products. Accordingly, irregular and uncommon use of a medical aid or appliance in a way contrary to its manufactured purpose will not prevent the good from being GST-free.

The items in the table in Schedule 3 that are of relevance in this instance are:

· item 47 - visual/tactile alerting devices and

· item 151 - auditory/tactile alerting devices.

The phrases 'visual/tactile alerting devices' and 'auditory/tactile alerting devices' are not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of these phrases.

The Macquarie Dictionary (1997), 3rd edition, The Macquarie Library Pty Ltd, New South Wales defines 'visual' to mean 'relating to sight', 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs of sense or touch. 2. perceptible to the touch ...' and 'alert' to mean '... 4. an alarm or warning...'

To be a visual/tactile alerting device within the meaning of Item 47, the device must be primarily designed to alert hearing impaired people to a strong occurrence, danger or presence through the person's sense of touch or sight. Similarly, to be an auditory/tactile alerting device within the meaning of Item 151, the device must be primarily designed to alert visually impaired people to a strong occurrence, danger or presence through the person's sense of touch or hearing.

Product A - Alarm clock & shaker and Product B - Vibrating portable alarm clock

The Products A and B are alarm clocks and not primarily designed to alert hearing or vision impaired people of a strong occurrence, danger or presence. Alerting a person to the time is not consistent with warning of a strong occurrence, danger or presence. Therefore, these products are not covered by Item 47 or Item 151 in Schedule 3.

The Products A and B are not covered by any other items in Schedule 3 or the Regulations. Hence, the supply of Products A and B is not GST-free under subsection 38-45(1) of the GST Act.

Further, the supply of Products A and B is not GST-free under any other provisions of the GST Act or any other Act.

Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, the supply of the Products A and B is a taxable supply. Hence, GST is payable on the supply.

Product C - Ring alerting system

The Product C is connected to an existing home phone and is supplied with a wireless doorbell push switch. The product is designed to provide a loud amplified sound and/or light when the phone rings or the door bell is pressed.

Product C alerts hearing impaired persons to the fact that someone is present at the door of their residence or is ringing the phone via a flashing light and/or an loud amplified sound. Therefore, it is considered that Product C falls within the scope of Item 47.

As Product C is covered by Schedule 3; is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability; you are making a GST-free supply of a medical aid or appliance under subsection 38-45(1) of the GST Act.

Product D - Vibration alerting device

Product D is intended to be used with a compatible device to produce a vibration effect. On its own it is not primarily designed to alert hearing or vision impaired people of a strong occurrence, danger or presence.

Product D is not covered by any other items in Schedule 3 or the Regulations. Hence, the supply of Product D is not GST-free under subsection 38-45(1) of the GST Act.

Under subsection 38-45(2) of the GST Act, a supply is GST-free if the thing supplied is supplied as a spare part for, and is specifically designed as a spare part for, another thing the supply of which would be GST-free under subsection 38-45(1) of the GST Act.

We consider that for the purposes of subsection 38-45(2) of the GST Act, a spare part is a part which has been specifically designed to replace a faulty, worn out or broken part of a medical aid or appliance.

Product D is not a spare part rather it is an optional device. Hence, the supply of Product D is not GST-free under subsection 38-45(2) of the GST Act.

The supply of Product D is not GST-free under any other provisions of the GST Act or any other Act.

Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, the supply of Product D is a taxable supply. Hence, GST is payable on the supply.