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Ruling

Subject: Medical aids and appliances

Question

Is the device a GST-free medical aid or appliance under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the device is not a GST-free medical aid or appliance under subsection 38-45(1) of the GST Act.

This ruling applies for the following periods:

Not applicable

The scheme commences on:

Not Applicable

Relevant facts and circumstances

You are a company carrying on an enterprise in a foreign country.

You are not registered for the goods and services tax (GST) in Australia.

You intend to market in Australia a medical aid (the device) to be used in the health industry.

We provided your representative in Australia with advice to the effect that the supply of this device in Australia does not fall under GST-free medical aids and appliances.

You contend that the device comes within a relevant medical definition given in the Merriam-Webster Dictionary.

In your submission, you contend that in the document titled, "Instructions for Use", the importance of maintaining the electrical charge in the device's battery is emphasised. You further contend that, therefore, the device is electrical in nature and thus satisfies the definition contained in the Merriam-Webster Dictionary.

You also contend that the intended use provision in the literature available for the device qualifies the device also to be GST-free under Schedule 3 to the GST Regulations.

You also state in your submission that the device is specifically designed for people with an illness or disability and is not widely used by people without an illness or a disability.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Section 38-45

Section 182-10

Section 182-15

Section 195-1

Reasons for decision

Supply of medical aids and appliances is GST-free where the medical aids and appliances satisfy all of the requirements specified in subsection 38-45(1) of the GST Act.

Under subsection 38-45(1) of the GST Act, for the supply of medical aids and appliances to be GST-free, they must:

· be covered by Schedule 3 of the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations),

· be specifically designed for people with an illness or disability and

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

For a medical aid or an appliance to be GST-free, all three requirements given in subsection 38-45(1) of the GST Act above must be satisfied.

A system of this sort is not listed as an item in Schedule 3 or the Regulations. Therefore, it is necessary to determine whether the device is the same in its functions as any item listed in Schedule 3.

You contend that the device satisfies a definition in Item 2 of Schedule 3.

That term is defined in the Macquarie Dictionary. Your device does not meet the common understanding of the term.

You also contend that the device should "qualify as a GST-free supply of a … Appliance".

The term is listed in the second column of Schedule 3. The second column of Schedule 3 is not operative - meaning that it should not be used to identify a GST-free medical aid or appliance without reference to the third column where specific items are listed. The purpose of the second column is explained in the GST Act as shown below.

Section 182-15 of the GST Act states:

The second column of the tables in Schedules 1, 2 and 3 are not operative. In interpreting an item in those tables, or any other operative provision, those columns may only be considered for a purpose for which an *explanatory section may be considered under subsection 182-10(2)

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

Subsection 182-10(2) of the GST Act states:

Explanatory sections form a part of this Act, but they are not operative provisions. In interpreting an operative provision, an explanatory section may only be considered:

a) in determining the purpose or objective underlying the provision; or

b) 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

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

d) 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.

Your device is not listed in the third column in Schedule 3. Further, none of the items listed can, in any way, be considered as equating to your device.

Therefore we take the view that the device is not an item listed in Schedule 3 or the Regulations. The fact that the device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability does not qualify it to be a GST-free medical aid or appliance unless it is also listed in Schedule 3. Consequently, the device does not satisfy subsection 38-45(1) of the GST Act. Hence the supply of the system is not GST-free.