Edited version of your written advice

Authorisation Number: 1013126355647

Date of notice: 15 December 2016

Ruling

Subject: GST and cast metal frameworks

Question

Are your supplies of cast metal frameworks subject to GST?

Answer

Yes, your supplies of cast metal frameworks are subject to GST.

Relevant facts and circumstances

● You operate a laboratory that supplies cast metal frameworks to dentists and other dental laboratories.

● You do not supply dental products directly to dental patients.

● You employ dental technicians, not dental prosthetists.

● You are registered for GST.

● The cast metal frameworks have been described.

● You do not supply the teeth or any other components for dentures when you supply the cast metal frameworks.

● You charge GST on these products.

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 section 38-10

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

Reasons for decision

Summary

To be GST-free, the supplies of cast metal frameworks must satisfy the requirements of a GST-free provision in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The relevant provisions are sections 38-10 and 38-45 of the GST Act. You do not satisfy section 38-10 because you do not make supplies of the products directly to patients. You do not satisfy section 38-45 because cast metal frameworks are not listed in the table in Schedule 3 to the GST Act, do not fit under any listed item in that table and are not considered a spare part for the supply of any GST-free product under section 38-45.

As you are registered for GST, your supplies of cast metal frameworks are taxable supplies and subject to GST.

Detailed reasoning

Under the GST Act some goods and services supplied by dental technicians are GST-free where certain requirements are satisfied. Supplies that do not satisfy the GST-free requirements will be taxable, provided the suppliers are registered or required to be registered for GST.

Taxable supplies - section 9-5 of the GST Act

Taxable supplies are subject to GST.

Under section 9-5, an entity makes a taxable supply if:

● it is made for consideration

● it is made in the course or furtherance of an enterprise that the entity carries on

● the supply is connected with the indirect tax zone, and

● the entity is registered or required to be registered for GST.

However, section 9-5 also provides that a supply is not taxable to the extent that it is GST-free or input taxed.

The provisions of the GST Act dealing with input taxed supplies are not relevant to supplies made in the dental industry. The relevant provisions of the GST Act to be considered are those that relate to GST-free supplies.

GST-free supplies

Sections 38-10 and 38-45 of the GST Act provide requirements under which the supply of dental goods may be GST-free.

Subsection 38-10(1) provides that a supply is GST-free if:

(a)  it is a service of a kind specified in the table in subsection 38-10(1), or of a kind specified in the GST regulations

(b) the supplier is a recognised professional in relation to the supply of services of that kind, and

(c) the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

All three of the requirements must be satisfied for a supply of professional services together with goods supplied in the course of that service to be GST-free under this category.

Supplies made by dental technicians under section 38-10 of the GST Act

Supplies made by dental technicians are not GST-free under section 38-10 of the GST Act. Dental technicians are restricted by the relevant State or Territory legislation from providing services directly to patients. As such, they only make supplies to other business entities such as dentists and other laboratories. Those supplies would not be for the appropriate treatment of the recipient of the supply, that is, a patient, as is required by paragraph 38-10(1)(c) of the GST Act. In other words, only supplies made direct to patients are GST-free under this category. As this requirement has not been met, it is not necessary to address the other two requirements.

Medical aids and appliances - subsection 38-45(1) of the GST Act

Subsection 38-45(1) provides a supply is GST-free if:

(a) it is covered by Schedule 3 (medical aids and appliances), or specified in the GST regulations, and

(b) the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.

A supply that satisfies all the requirements in subsection 38-45(1) will be GST-free at all points in the supply chain. The supply remains GST-free no matter who supplies it or who the supply is made to.

Cast metal frameworks are not specifically listed in Schedule 3 of the GST Act or the GST Regulations.

The item in the table in Schedule 3 to the GST Act that may be of relevance to your supply is:

item 30 - 'dentures and artificial teeth'.

'Dentures', for GST purposes, are considered to be an artificial restoration of several teeth (partial denture) or of all of the teeth of either jaw (full denture). 'Artificial teeth' are considered to be those which are fabricated and replace natural teeth in form and function. The phrase 'artificial teeth' includes one single tooth as well as a multiple of teeth. Full crowns and bridges are artificial teeth.

In your case you are supplying unfinished 'cast metal frameworks' which are only the base of the partial denture. You do not supply the teeth or other components for dentures when you supply the frameworks.

You are not supplying dentures or artificial teeth as described in item 30 in Schedule 3 to the GST Act.

Therefore, the supplies of cast metal frameworks are not GST-free under subsection 38-45(1) of the GST Act.

GST-free spare parts

Subsection 38-45(2) of the GST Act provides that spare parts, that are specifically designed as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act, are also GST-free.

The term 'spare part' is not defined in the GST Act. Therefore, it is given its ordinary meaning. The Macquarie Dictionary (1997) defines a spare part as 'a part which replaces a faulty, worn, or broken part of a machine....'.

On this basis, it is considered that a supply of a part, that can be used to replace a faulty, worn, or broken part of another thing, is a spare part under subsection 38-45(2) of the GST Act, provided that the part supplied is specifically designed for another thing which is GST-free under subsection 38-45(1) of the GST Act.

A cast metal frame is the internal framework for a denture. Dentures are covered by item 30 in the table in Schedule 3 to the GST Act and are GST-free. Whilst the framework is a component for a denture, it is not a 'spare-part' for a denture. This is because if the framework is broken, it is either repaired or a completely new denture is supplied. A new framework is never actually supplied to replace a faulty, worn or broken framework or the denture. Therefore, it is not a GST-free spare part. Therefore, the supplies of the cast metal frameworks are not GST-free under subsection 38-45(2) of the GST Act.

Your supplies of cast metal frameworks are not GST-free under subsections 38-45(1) or 38-45(2) of the GST Act.

As you are registered for GST, your supplies of cast metal frameworks are taxable supplies and subject to GST.