Edited version of your written advice

Authorisation Number: 1012711243671

Ruling

Subject: GST and medical aids and appliances

Question

Is your importation and subsequent sale of 'the Product' subject to GST?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You will be importing a new item (the Product).

The Product has been recently registered on the Australian Register of Therapeutic Goods and you have provided a copy of the Australian Register of Therapeutic Goods Certificate (ARTG Certificate).

The ARTG Certificate sets out the intended purpose of the Product

You have also provided a Product brochure which details the features of the Product and additional information was set out on your website.

The Product is a device used by health practitioners (e.g. Orthotist, Podiatrist, Physiotherapist etc.), to assist in developing custom made or custom adjusted orthotic devices. The Product will provide pressure readings on a specific area of the body e.g. measurement of pressure under an ulceration of the foot. This will allow the clinician to customize an orthotic to more accurately distribute weight, rather than via trial and error, in order to achieve better clinical outcomes.

You have attempted to classify the item under Schedule 3 to the GST Act, or Schedule 3 to the GST Regulations however from your understanding the products listed are 'end user' products.

The Product will also be used by health practitioners to assist in developing orthotic devices. The orthotic devices they develop are GST exempt, under Schedule 3 to the ST Act, Item 68 - 75, 'Mobility of people with disabilities - physical: orthoses'.

Relevant legislative provisions

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

Section 13-5

Section 13-10

Section 13-15

Section 38-45

Section 195-1

Schedule 3 - Medical aids and appliances

Reasons for decision

Goods and services tax (GST) is payable on any 'taxable importation' or taxable supply that you make. An item will not be a taxable importation or taxable supply to the extent it would have been GST-free if supplied within Australia.

A supply of a medical aid or appliance is GST-free where the medical aid or appliance is:

• covered by Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) or specified in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations); and

• specifically designed for people with an illness or disability; and

• not widely used by people without an illness or disability.

All three criteria listed above must be satisfied for the medical aid or appliance to be GST-free.

Schedule 3 to the GST Act, and Schedule 3 to GST Regulations, list a range of items which may be GST-free medical aids or appliances.

In considering whether the Product was covered by an item in Schedule 3, particular consideration was given to whether the Product was covered by the following items:

• Item 42 - orthotics;

• Item 68 - spinal orthoses;

• Item 69 - lower limb orthoses;

• Item 70 - upper limb orthoses.

The words 'orthotics' and 'orthoses' are not defined in the GST Act.

The Macquarie Dictionary (Sixth Edition online version) defines orthosis (the singular of the word orthoses) as: 

'A device applied to the body to modify position or motion, as a supporting collar, plaster cast etc'.

Modify is defined to mean 'to change somewhat the form or qualities of; alter somewhat'.

It is considered that the terms 'orthotics' and 'orthoses' are a reference to a device which is designed to be applied to the body to change or alter position or motion, or prevent movement, of the spine or limbs.

In this case the Product is a device designed to assist health practitioners develop custom made or custom adjusted orthotic devices. The Product is not a device which is designed to be applied to the body to change or alter position or motion, or prevent movement, of the specific parts of the body. Therefore the Product does not fall within the scope of the items listed above.

The Product does not fall within the scope of any other items listed in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations.

In addition, the Product is neither specifically designed for people with an illness or disability nor is it not widely used by people without an illness or disability. The Product is designed for use by health practitioners who typically would not have an illness or disability.

As such, a supply of the Product in Australia would not be GST-free. Consequently, when you import the Product for home consumption (within the meaning of the Customs Act 1901), or sell the product within Australia the importation will be a taxable importation and subject to GST and the subsequent sale within Australia would be a taxable supply.