Edited version of private advice

Authorisation Number: 1051848216796

Date of advice: 24 June 2021

Ruling

Subject: GST and travel socks

Question

Is the importation of travel socks that have been registered with the Australian Government Therapeutical Goods Administration a non-taxable importation under section 13-10 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act)?

Answer

No

Relevant facts and circumstances

You are importing travel socks that have been successfully registered with the Australian Government Therapeutic Goods Administration.

You provided the registration details to their freight forwarder; however, the freight forwarder will not accept the GST exempt status without a private ruling from the ATO.

You have provided the registration form from the Australian Government Therapeutic Goods Administration which describes the travel socks as a medical device.

The sock provides travel benefits and will be marketed this way. It also provides a number of other medical benefits for wearing whilst playing sport, undertaking activities and recovery from activity that you intend to market also.

Marketing will be done utilising online social media platforms and other targeted digital platforms. You heavily leverage these digital marketing platforms to target consumers defined as travellers, sport participants, and those active. You leverage athletes to influence. These athletes are constantly travelling, participating in sport and recovering and their endorsements will leverage the product interest.

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 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 42-5.

Reasons for decision

Under section 13-5 of the GST Act an entity makes a taxable importation if:

•                              goods are imported, and

•                              the entity enters the goods for home consumption within the meaning of the Customs Act 1901 (Customs Act).

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

Section 13-10 of the GST Act provides that an importation is a non-taxable importation if:

•                              it is a non-taxable importation under Part 3-2 of the GST Act (which contains only Division 42 of the GST Act), or

•                              it would have been a supply that was GST-free or input taxed if it had been a supply.

Part 3-2 of the GST Act, and in particular, section 42-5 of the GST Act deals with the importation of goods that are non-taxable importations in accordance with the Customs Tariff Act 1995. The importation of the travel socks by you does not satisfy the requirements of any of the items in Division 42 of the GST Act for a non-taxable importation.

However, an importation is also a non-taxable importation to the extent that, had it been a supply, the supply would have been GST-free or input taxed.

There are no provisions in the GST Act that would make the supply of the travel socks input taxed. It is therefore necessary to determine whether the supply of the travel socks would be GST-free.

Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where it:

•                              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.

The supply of a medical aid or appliance that meets all the three elements of subsection 38-45(1) of the GST Act will be GST-free. The supply will be GST-free all the way through the supply chain, and not only when supplied to a person with an illness or disability.

Item 3 in the table in Schedule 3 to the GST Regulations lists 'surgical stockings'. We consider that surgical stockings are garments which exert sufficient pressure on the wearer to be of therapeutic benefit. The garment must be manufactured with the materials, features, technology and fabrics that are ideal for providing constant and consistent compression, at the correct pressure, to the user.

In this case, the garments are in the form of a sock and are intended to fit tightly over the leg and foot to apply compression/pressure (i.e. graduated or even-force), typically for the treatment/prevention of a disorder(s) of circulation [e.g. venous insufficiency, deep vein thrombosis (DVT)]. Therefore, the travel socks would be considered a compression garment as listed in Item 7.

However, to be a GST-free supply of a medical aid and appliance the travel socks also need to be specifically designed for people with an illness and disability and not widely used by people without an illness or disability.

In determining whether a medical aid or appliance is specifically designed for people with an illness or disability, reference should be made to the designer's/manufacturer's intention of how the good is to be used and its features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased.

You have confirmed that intention behind how the travel sock is to be used is for consumers defined as travellers and sport participants etc. Therefore, the travel socks are not specifically designed for people with an illness or disability.

The phrase 'not widely used' is not defined in the GST Act. It therefore takes its ordinary meaning, having regard to the context in which it appears. In the context of paragraph 38-45(1)(b), the Commissioner considers 'not widely used' to mean not used by many people who do not have an illness or disability. Although not an exhaustive list, the following factors will be relevant when considering whether a product is widely used by people without an illness or disability:

•                              The product is primarily sold in retail or other outlets that predominantly sell a standard version of the product (that is, products that do not have features specifically designed for people with an illness or disability) to the general public.

•                              The marketing material for the product emphasises how it enhances the lifestyle of people without an illness or disability.

Your marketing will be done utilising online social media platforms and other targeted digital platforms. You heavily leverage these digital marketing platforms to target consumers defined as travellers, sport participants, and other active people. You leverage athletes to provide influence. These athletes are constantly travelling, participating in sport and recovering and their endorsements will leverage the product interest.

As a result, the travel socks are widely used by people without an illness and disability.

As the travel socks do not satisfy all the elements of subsection 38-45(1) of the GST Act, their supply will not be GST-free. Consequently, the importation of the travel socks does not satisfy the requirements of a non-taxable importation under section 13-10 of the GST Act. As such, the importation is subject to GST.