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Edited version of your private ruling
Authorisation Number: 1012440299665
Ruling
Subject: GST and supply of a pain relief device
Question
Are you 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 a pain relief device?
Decision
No, you are not making a GST-free supply under subsection 38-45(1) of the GST Act when you supply a pain relief device.
Relevant facts and circumstances
You are registered for goods and services tax (GST). You supply pain relief device (the device).
The device is a small, portable, battery-powered unit with leads connected to a number of ultra-thin acupuncture needles that are inserted to stimulate nerves. The device has been developed primarily for the relief of pain associated with various illnesses.
The device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability.
There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.
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 Section 13-5
A New Tax System (Goods and Services Tax) Act 1999 Section 13-10
A New Tax System (Goods and Services Tax) Act 1999 Section 13-15
A New Tax System (Goods and Services Tax) Act 1999 Division 38
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1)
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3
A New Tax System (Goods and Services Tax) Regulations 1999
Reasons for decision
Under subsection 38-45(1) of the 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.
The only item of relevance to this case is item 141 in the table in Schedule 3 (Item 141). Item 141 lists 'transcutaneous nerve stimulator machines' (TENS machines). The device is not specifically listed in Schedule 3 or the GST Regulations.
The phrase 'transcutaneous nerve stimulator machines' is not defined in the GST Act.
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 device is a small portable battery-operated unit with leads connected to needles that are then inserted into, not attached to, the skin. Therefore, although the purpose of the device is to aid pain relief, it does not meet the definition of a TENS machine as it is invasive and is not attached to unbroken skin. As such, the supply of the device is not GST-free under subsection 38-45(1) of the GST Act.
You are registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, in supplying the device you are making a taxable supply under section 9-5 of the GST Act.
Importation of the device
Section 13-5 of the GST Act provides that you make a taxable importation if:
· the goods are imported, and
· you enter the goods for home consumption (within the meaning of the Customs Act 1901)..
Section 13-10 provides that an importation is a non-taxable importation if:
· it is a non-taxable importation under Part 3-2 of the GST Act, or
· it would have been a supply that was GST-free or input taxed if it had been a supply.
As the supply the device is not GST free, the importation of the device is not a non-taxable importation unless it satisfies Part 3-2 of the GST Act. The importation of the device is a taxable importation provided the goods are entered for home consumption and it is not a non-taxable importation under Part 3-2 of the GST Act. GST is payable on any taxable importation (section 13-15 of the GST Act).