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Edited version of private advice
Authorisation Number: 1012617876238
Ruling
Subject: GST and medical aids and appliances
Questions
1. Is your supply of the products GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
2. Is your supply of the spare parts GST-free under subsection 38-45(2) of the GST Act?
Answers
1. Yes, your supply of the products is GST-free under subsection 38-45(1) of the GST Act.
2. Yes, your supply of the spare parts is GST-free under subsection 38-45(2) of the GST Act.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You supply products used by health care professionals to provide both types of cardiac resuscitation (pacing and defibrillation) inside and outside the hospital.
Your products include cardiac monitors designed for monitoring and defibrillating patients with suspected cardiac arrhythmia. In the event of a cardiac arrest, the products can deliver a defibrillation shock to recalibrate the heart and resume normal rhythm.
You also supply spare parts that are specifically designed as spare parts of the products and are necessary in order for the products to be in working condition
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) and
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(3).
Reasons for decisions
1. Under subsection 38-45(1) of the GST Act, a supply of a medical aid or appliance is GST-free if the medical aid or appliance:
(a) is covered by Schedule 3 to the GST Act, or in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations); and
(b) is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.
Paragraph 38-45(1)(a) - covered by Schedule 3
Item 1 of Schedule 3 to the GST Act (Item 1) lists 'heart monitors' as a specified medical aid and appliance for the purposes of paragraph 38-45(1)(a) of the GST Act.
The term 'heart monitors' is not defined in the GST Act; and thus, will take on its ordinary meaning unless the term has a special or technical meaning. Where a term has a special meaning, it is necessary to determine its meaning by reference to the industry to which the term relates.
The Stedman's Medical Dictionary (2000) defines a cardiac (heart) monitor to mean: 'an electronic monitor which, when connected to the patient, signals each heartbeat with a flashing light, an electrocardiographic curve, an audible signal, or all three'. As such, it is considered that a device with the primary function of monitoring a patient's heartbeat is a 'heart monitor', and is covered by Item 1.
The products are cardiac monitors used for monitoring patients with suspected cardiac arrhythmia. They can deliver defibrillation shock to recalibrate the heart and resume normal rhythm. Therefore, it is considered that the products are heart monitors for the purpose of Item 1. The requirement in paragraph 38-45(1)(a) of the GST Act is satisfied.
Paragraph 38-45(1)(b) - specifically designed for people with an illness or disability, and not widely used by people without an illness or disability
A medical aid or appliance is specifically designed for people with an illness or disability if it is created with the intention of having certain features or characteristics that would be of benefit to people with an illness or disability.
For the purpose of paragraph 38-45(1)(b) of the GST Act, the word 'use' does not connote exclusive use. A medical aid or appliance may be operated and used by medical personnel; but there is a concurrent or simultaneous passive use by the patient.
Based on the information provided, your products are designed to contain features that will be of benefit to people with an illness or disability. The products are not widely used by people without an illness or disability, given that the products are designed to be used on patients and may be of little or no use if not connected to the patient. Therefore, the requirement in paragraph 38-45(1) (b) of the GST Act is satisfied.
The supply of the products is GST-free under subsection 38-45(1) of the GST Act.
2. Subsection 38-45(2) of the GST Act provides that the supply of a spare part that is specifically designed as a spare part for another thing that is GST-free under subsection 38-45(1) is also GST-free. A supply of generic spare part which may be used for an item that is GST-free under 38-45(1) will not be GST-free.
You advised that the spare parts are specifically designed as spare parts of the products which are necessary in order for the products to be in working condition.
As the supply of the products is GST-free under subsection 38-45(1) of the GST Act, the supply of the spare parts is also GST-free under subsection 38-45(2).
Supplies not treated as GST-free
According to subsection 38-45(3) of the GST Act, a supply is not GST-free under subsection 38-45(1) or 38-45(2) if the supplier and the recipient have agreed that the supply, or supplies that include that supply, not be treated as GST-free.