Edited version of private advice

Authorisation Number: 1052301210444

Date of advice: 19 September 2024

Ruling

Subject: GST - supply of compression garments

Question 1

Is your supply of compression bandages and compression stockings GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

Your supply of compression bandages is a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

Your supply of compression stockings is GST-free under subsection 38-45(1) of the GST Act, where the stocking is designed for people with an illness or disability and is not widely used by people without an illness or disability.

Your supply of compression stockings is not GST-free under subsection 38-45(1) of the GST Act, where the stocking is designed, or widely used by people in the general community, merely for the prevention of an illness or disability. The supply of these compression stockings is a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

You are a supplier of registered medical devices.

You supply a range of compression bandages and compression stockings.

For the purposes of subsection 38-45(3) of the GST Act, you have not entered into any agreements with recipient/s to not treat your supplies as GST-free supplies.

Your compression stockings are classified against either a compression class (CCL), or a level of millimetres of mercury (mmHg). The level of mmHg denotes the pressure gradient or level of compression exerted by the product.

All CCLs provide a medically significant level of compression to the customer. Your compression stockings and garments in CCL 1 are specifically designed to be used as a preventative health measure to maintain leg health and comfort, as well as an aid to sports recovery. Your compression stockings and garments in CCL 2 and above are prescribed or recommended by a healthcare professional for the treatment of an illness or disability.

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 38-45

A New Tax System (Goods and Services Tax) Regulations 2019 section 38-45.01

Reasons for decision

Subsection 38-45(1) of the GST Act provides that a supply of a medical aid or appliance is GST-free if:

•                     it is covered by Schedule 3 to the GST Act or specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations), and

•                     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.

Medical aid covered by the GST Regulations

For the purposes of paragraph 38-45(1)(a) of the GST Act, item 7 of the table in subsection 38-45.01(1) of the GST Regulations specifies a 'compression garment.'

We consider 'compression garment' to mean a covering designed to be worn or applied to a particular part of the body which exerts sufficient pressure on the wearer to be of therapeutic benefit.

Your compression stockings are compression garments, in satisfaction of paragraph 38-45(1)(a) of the GST Act.

A compression bandage is not a garment, as it is not designed to be worn or applied to any particular part of the body. It is a medical dressing which, while applied to the body, is distinguishable from coverings that are tailored to specific body parts.

Your supply of compression bandages is taxable under section 9-5 of the GST Act.

Medical aid specifically designed for, and not used by people without, an illness or disability

To satisfy paragraph 38-45(1)(b) of the GST Act, a compression garment must be both:

•                     specifically designed for people with an illness or disability, and

•                     not widely used by people without an illness or disability.

Compression garments that are designed, or widely used by people in the general community, merely for the prevention of illness or disability will not satisfy the requirements of paragraph 38-45(1)(b) of the GST Act. This includes compression garments designed for, or widely used by, people:

•                     who stand for long periods of time to prevent legs becoming sore or swollen

•                     who are pregnant to lessen swollen feet and legs and water retention, or

•                     for general prevention of deep vein thrombosis (for example, by people travelling on long flights).

The indications or therapeutic uses of some of your products are for everyday use as a preventative measure for leg health and comfort, as well as maintaining leg health during travel.

Therefore, we consider those compression stockings do not satisfy the requirements of paragraph 38-45(1)(b) of the GST Act. Accordingly, your supply of those compression stockings is not GST-free under subsection 38-45(1) of the GST Act. Your supply of those products is a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

You describe the indications or therapeutic uses of some of your products as being for the treatment of serious medical conditions and to assist with healing.

We take the view that those compression stockings are designed for people with an illness or disability and are not widely used by people without an illness or disability. Accordingly, those compression stockings satisfy paragraph 38-45(1)(b) of the GST Act.

GST-free supply

Your supply of compression stockings designed for people with an illness or disability, and not widely used by people without an illness or disability, is GST-free under subsection 38-45(1) of the GST Act.