Edited version of your private ruling

Authorisation Number: 1012487367702

Ruling

Subject: GST and medical aids and appliances

Question 1

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

Answer

No the supply of a medical appliance is not GST-free under subsection 38-45(1) of the GST Act. The supply of this product is subject to GST.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are the supplier of medical appliances.

These medical appliances will primarily be sold to hospitals and not-for-profit institutions.

The products are all specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

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).

Reasons for decision

Section 9-5 of the GST Act states that you make a taxable supply if:

you make a 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.

There are no provisions in Division 40 of the GST Act to make these supplies input taxed. Subdivision 38B of the GST Act determines those health services which are GST-free. Of relevance to this case is subsection 38-45(1) of the GST Act.

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.

The supply of a medical aid or appliance is only GST-free where all of the above requirements are satisfied.

There is no item in Schedule 3 or the GST Regulations that specifically lists robot assisted therapy products for upper limbs. However, item 70 in the table in Schedule 3 (Item 70) lists 'upper limb orthoses'.

It is considered an item will be an 'upper limb orthosis' where it is a device designed to be applied to the body to change or alter position or motion, or prevent movement, of the shoulder, arm, forearm, wrist or hand for the treatment of an illness or disability to that shoulder etc.

In the contexts of this category of medical aids and appliances in Schedule 3 to the GST Act, we consider that Item 70 is to be interpreted as only covering medical devices which are designed to be worn, that is, to be carried or held on the body or about the person.

The medical appliances are equipment designed to be used in a way that exercise equipment, for example, is designed to be used.

For these reasons, although the products are designed for upper limb disabilities, we consider that it does not fall within Item 70. There are no other products in Schedule 3 that are relevant to these products. Therefore, the supply of the medical appliances does not meet the first requirement of subsection 38-45(1) of the GST Act.  Accordingly, the sale of these products is not a GST-free supply.

As all the requirements of section 9-5 of the GST Act are satisfied, the sale of the medical appliances is a taxable supply and subject to GST.