ATO ID 2001/638: GST and electrocardiogram (ECG) cables
Date of decision: 7 September 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of medical appliances, 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 it supplies ECG cables?

Decision
Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies ECG cables.

Facts
The entity is a supplier of medical appliances. In this case, the entity is making a supply of ECG cables. The entity supplies ECG cables as a part for heart monitors. The supply of the heart monitor is a GST-free supply under subsection 38-45(1) of the GST Act. The supply is made when original ECG cables are worn or faulty. The ECG cables are specifically designed as a part for GST-free heart monitors. In this case, the ECG cables are not capable of being used with devices other than the GST-free heart monitor. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Under subsection 38-45(2) of the GST Act, a supply of a spare part will be a GST-free supply if the spare part is: 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) defines 'spare part' as, amongst other things, '...a part which replaces a faulty, worn, or broken part of a machine...'. In this case, the ECG cable is supplied to replace a worn or faulty component of a GST-free heart monitor. As such, the ECG cable is considered to be a 'spare part' for the purposes of the GST Act. Furthermore, the ECG cable is supplied as a spare part for a medical appliance that is GST-free under subsection 38-45(1) of the GST Act. In addition, as the ECG cables can not be used as a spare part for other appliances, it is considered that the ECG cables are specifically designed as a spare part for GST-free heart monitors. Therefore, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies ECG cables.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-45(1) subsection 38-45(2) Schedule 3 table item 1
Related ATO interpretative decisions: ATO ID 2001/216
Other references: The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.
Subject references: Goods & services tax GST free GST health Section 38-45 - medical aids & appliances