Edited version of your written advice

Authorisation Number: 1012911461682

Date of advice: 13 November 2015

Ruling

Subject: GST and medial aids and appliances

Issue 1

Are you making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply a product for a GST-free medical aid?

Answer

No, your supply of the product will be a taxable supply under section 9-5 of the GST Act.

Issue 2

Is GST payable on your importation of the product in Australia?

Answer

No, you are not making a non-taxable importation under paragraph 13-10(b) of the GST Act when you import the product. You will be is making a taxable importation under section 13-5 of the GST Act.

Relevant facts and circumstances

• You are an Australian company that is registered for GST.

• You import and supply the product which is designed as a product for a medical aid.

• The product is manufactured overseas by the non-resident (manufacturer). The manufacturer is not registered for GST in Australia.

• The product is supplied to replace worn out, faulty, broken or misplaced components of the medical aid.

• The product is designed specifically as an accessory to and for use in conjunction the medical aid.

• The product cannot be used for any other purpose or in conjunction with any other product aside from the medical aid.

• The product is used specially for the people with an illness or disability.

• The product is marketed to hospitals and nursing home for the people with an illness or disability.

• The product is not marketed to the wider community.

• The product is not available on the open market.

• You have provided a copy of the brochure and print-outs which provides a detailed description of the product.

Relevant legislative provisions

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 38-45

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(2)

A New Tax System (Goods and Services Tax) Act 1999 Schedule Sch3

New Tax System (Goods and Services Tax) Regulations 1999

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 product 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, 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.

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.

Medical aids or appliances which satisfy all the elements of subsection 38-45(1) are GST-free at all stages of the supply chain. The supply is GST-free no matter who makes the supply or who the supply is made to.

Item 66 in the table in Schedule 3 to the GST Act (Item 66) lists pressure management mattress and overlay.

The product is not items that is listed in Schedule 3 or in the GST Regulations, or is there a general class of goods listed which covers the product. Therefore, the issue to be considered is whether the product forms part of the GST-free supply of the pressure management mattress.

It is considered that pressure management mattress and overlays are those that may be used to comfort and prevent bed sores by evenly distributing the pressure exerted by the mattress on the patient's body.

The product is designed for use in conjunction with the pressure management mattress and overlay, an item which may be GST-free under Item 66 of Schedule 3.

However, the product is a stand-alone device. It is an entirely separate piece of equipment to the pressure management mattress and overlay, and performs a completely distinct function from that of the pressure management mattress and overlay (low pressure air from the product will inflate the pressure management mattress).

The product does not form an additional or extra part of the equipment of a pressure management mattress nor is it dependent upon, or subordinate or auxiliary to, the pressure management mattress. At times the product performs the first step to provide pressure relief to the patient, that is to inflate the mattresses/positioning devices in case the mattresses does not have the correct air pressure, the product is also utilised on its own to just perform the task of air supply.

Whilst the process of inflating the pressure management mattress may accompany the process of providing pressure relief to the patients, the product itself does not contribute to the working of the pressure management mattress if the mattress is already inflated to the correct pressure. Although the two devices may be interdependent or used in conjunction with each other to complete the comfort and prevent bed sores of a patient by even, each device performs a separate and distinct process, which may or may not need to be combined to necessitate a successful pressure relief to the patients.

Therefore, it is considered that the product is not a pressure management mattress or overlay, and is therefore not covered by Item 66.

You contend that because the product is designed specifically as an accessory to and for use in conjunction with the pressure management mattress and overlay which is classified as a GST-free pressure management mattress and overlay under Item 66 of Schedule 3, the product should also be GST-free.

Some items in Schedule 3 list accessories of certain medical aids and accessories. However, Item 66 does not cover accessories.

As the product is not covered by Schedule 3, the supply is not GST-free under subsection 38-45(1) of the GST Act.

Subsection 38-45(2) of the GST Act provides that a supply of a spare part will be a GST-free supply if the spare part is:

• supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and

• specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.

The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'

The product is not supplied to replace an existing part that is faulty, worn or broken part of the pressure management mattress. As such, it is not considered to be a 'spare part' for the purposes of the GST Act. Hence, the supply does not satisfy the requirements of subsection 38-45(2) of the GST Act.

The supply of the product is not GST-free under subsections 38-45(1) or (2) of the GST Act. The supply is not GST-free under any other provision of Division 38 of the GST Act. Furthermore, the supply is not input taxed under Division 40 of the GST Act. Therefore, as all the requirements of section 9-5 of the GST Act are met, the supply of the product is a taxable supply.