Edited version of private advice

Authorisation Number: 1052116737956

Date of advice: 10 May 2023

Ruling

Subject: GST medical aids and appliances

Question

Is the sale of XXX (the product) a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

The sale of XXX is not GST-free, as they do not meet the requirements under section 38-45 of the GST Act. As the supply is not GST-free and they meet all the requirements of section 9-5 of the GST Act, the product is a taxable supply.

This ruling applies for the following periods:

[omitted]

The scheme commenced on:

[omitted]

Relevant facts and circumstances

You are registered for Goods and Services Tax (GST) from 1 April 20XX.

You are a supplier of XXX.

[omitted]

Relevant legislative provisions

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

Section 9-5

Subsection 38-45(1)

Reasons for decision

Goods and services tax (GST) is payable on taxable supplies.

Under section 9-5 of the GST Act, you make a taxable supply if:

(a)  You make a 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 the indirect tax zone (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.

There are no provisions in the GST Act under which your sale of the product input taxed.

We considered whether your sale of the product may be GST-free under subsection 38-45(1) of the GST Act.

Subsection 38-45(1) of the GST Act states:

A supply is GST-free if:

(a)  It is covered by Schedule 3 (medical aids and appliances), or specified in the 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.

Schedule 3 Medical aids and appliances covers test strips at item 36 in the third column.

ATO Interpretative Decision ATO ID 2002/534 discusses the issue of 'Is the entity, a supplier of medical aids and appliances, 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 it supplies blood coagulation test strips?' and it considered whether the scope of item 36 is restricted to diabetes test strips.

ATO ID 2002/534 provides that:

The meaning of the phrase 'test strip' is clear and unambiguous. It is not necessary to consider the category heading in the second column for any of the purposes listed in subsection 182-10(2) of the GST Act to interpret the meaning of 'test strip'. This means that Item 36 is not restricted to diabetes test strips and covers the blood coagulation test strips.

[omitted]

Paragraph 38-45(1)(b) of the GST Act requires that thing supplied is specially designed for people with an illness or disability and is not widely used by people without an illness or disability.

The Commissioner's view on how the key elements within subsection 38-45(1) of the GST Act are interpreted can be found in Goods and Services Tax Determination GSTD 2021/2 Goods and services tax: adjustable beds, pressure mattresses and pressure management overlays (GSTD 2021/2) which although is made in the context of bedding products for people with disabilities, the principles to which are equally applicable to any product that would be considered for GST-free treatment under the subsection.

Paragraph 7 of GSTD 2021/2 provides:

Specifically designed

7. The following factors are a non-exhaustive list of matters you should take into account when considering whether a particular product is specifically designed for people with an illness or disability:

•         An objective view of the design features and characteristics of the product indicate whether its essential character is that it is specifically designed for people with an illness or disability.

•         The designer's or manufacturer's intention of how the particular product is to be used. Indicators of the designer's or manufacturer's intention include an objective consideration of how the product is marketed and the type of outlets at which the product can be purchased.

Paragraphs 8 to 10 of GSTD 2021/2 provides:

Not widely used

8. 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. It is a question of degree whether a product is not widely used by people without an illness or disability. The Commissioner considers that it is reasonable to conclude that the test is not satisfied if the product is widely purchased by or on behalf of people without an illness or disability, without the need to examine how this class of people in fact use the product.

9. 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.

10. The following factors will be relevant, but are not an exhaustive list, when considering whether a product is widely used by people without an illness or disability:

•         The product is widely sold in retail or other outlets that predominantly sell standard beds (that is, beds 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.

Paragraph 5.27 of the explanatory memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 explains that 'certain aids and appliances designed for people with an illness or disability which are not of a kind ordinarily used in the wider community are GST-free.'

[omitted]

Therefore, your product is not specifically designed for people with an illness or disability, and it is widely used by people without an illness or disability. Hence, you do not meet the requirements of paragraph 38-45(1)(b) of the GST Act.

As you do not meet all of the requirements of subsection 38-45(1) of the GST Act, your sale of the product is not GST-free under that provision.

There are no provisions of the GST Act under which your sales of the product are GST-free.

Therefore, as all of the requirements of section 9-5 of the GST Act are met, GST is payable on your sales of the product.