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Edited version of your written advice
Authorisation Number: 1012898555945
Date of advice: 23 October 2015
Ruling
Subject: GST status of gel sheeting and ointments
Question 1
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 the products?
Answer
No, the supply will be a taxable supply.
Question 2
Are you making a non-taxable importation under paragraph 13-10(b) of the GST Act, when you import the products?
Answer
No, you are not making a non-taxable importation under paragraph 13-10(b) of the GST Act when you import the products. You will be is making a taxable importation under section 13-5 of the GST Act.
Relevant facts and circumstances
• You are registered for the goods and services tax (GST).
• You import the products and supply them to Hospitals, Day Surgeries and Clinics as well as to individuals on-line.
• The particular products you supply are specifically designed for advanced wound care.
• You provided the product information
• You contend they are analogous to other similar wound healing products contained in Schedule 3 to the GST Act.
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).
A New Tax System (Goods and Services Tax) Act 1999 Section 38-45
A New Tax System (Goods and Services Tax) Act 1999 Section 13-10
Reasons For Decision
GST is payable if an entity is making a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
You make a taxable supply if:
(a) you make the supply for *consideration, and
(b) the supply is made in the course or furtherance of an *enterprise that*you carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(* denotes a defined term in the GST Act.)
The supply of the products satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as follows:
• the supply is made for consideration
• the supply is made in the course of your enterprise
• the supply is connected with Australia because the products are made available in Australia to the recipient, and
• you are registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Your supply is not input taxed under Division 40 of the GST Act, so the next step is to consider whether your supply is GST-free.
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.
Items 1 to 5 in Schedule 3 to the GST Regulations are listed under the category of Advanced wound care. The 5 items are:
1 Alginate
2 Hydro colloids
3 Hydro gel
4 Polyurethane film
5 Polyurethane foam
It is considered that an 'advanced wound care' item will be GST-free when it is predominantly made up of the components listed in items 1 to 5 of Schedule 3 to the GST Regulations.
As both products are 100% constituted of XXX, they do not contain any of the above 5 items. Hence the products do not come under the advanced wound care products in Schedule 3 and are not GST-free. Thus paragraph 38-45(1)(a) of the GST Act is not satisfied. We do not need to discuss the rest of the requirement of subsection 38-45(1) of the GST Act.
The supply of the products is not GST-free under subsections 38-45(1) of the GST Act. The supply is not GST-free under any other provision of Division 38 of the GST Act.
Therefore, all the requirements of section 9-5 of the GST Act are met, and the supply of the products is a taxable supply.
Adding medical aids and appliances to Schedule 3 to the GST Act
The ATO acknowledges that your products may have beneficial effects on the treatment of skin conditions however it cannot go against clear wording of tax legislation. Only Parliament - and not the ATO - can add new medical aids and appliances to Schedule 3 to the GST Act. This is done by way of a further written determination by the Health Minister.
The importation of the products
Taxable importation is a defined under section 195-1 as follows:
taxable importation has the meaning given by subsections 13-5(1) and 114-5(1).
Section 13-5 of the GST Act provides that the importation of goods into Australia is subject to GST if they are entered for home consumption within the meaning of the Customs Act 1901. Under both subsection 13-5(1) and 114-5(1) of the GST Act, an import will not be a taxable importation if it is a non-taxable importation.
Non-taxable importation is a defined under section 195-1 as follows:
non-taxable importation has the meaning given by section 13-10 and Division 42.
The products are not covered under Division 42 of the GST Act.
Under paragraph 13-10(b) of the GST Act, an importation is a non-taxable importation if, had the importation been a supply, the supply would have been GST-free or input taxed.
As discussed in Question 1, the supply of the products is neither input-taxed nor GST-free under subsection 38-45(1) of the GST Act. As such, you are not making a non-taxable importation under paragraph 13-10(b) of the GST Act.
The importation of the products meet the positive limbs of section 13-5 of the GST Act. Furthermore, the importation is not a non-taxable importation. As such, you are making a taxable importation under section 13-5 of the GST Act when you import the products.
Where the importations are taxable, entities that are registered for GST may be entitled to input tax credits for GST paid on the taxable importations. An entity is entitled to an input tax credit for any creditable importations that it makes. See GSTR 2003/15.