ATO ID 2001/602: GST and muscle stimulation machine
Date of decision: 11 October 2001
Business line: Indirect Tax

Issue
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 a muscle stimulation machine?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies the muscle stimulation machine. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of medical aids and appliances. The entity supplies a muscle stimulation machine. The machine is primarily used on patients who have suffered a stroke and whose muscles require massaging and stimulation to prevent atrophication. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: The muscle stimulation machine is not specifically listed in Schedule 3 or specified in the GST Regulations. However item 141 in Schedule 3 (Item 141) lists the 'transcutaneous nerve stimulator machine' (TENS machine). The phrase 'transcutaneous nerve stimulator machine' is not defined in the GST Act. When a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. When a word or phrase has a technical meaning it is necessary to determine the meaning by reference to the industry in which that word or phrase relates. Given that this phrase appears in the context of a list of medical aids and appliances, it is considered to have a special or technical meaning. After consultation with the health industry it is considered that a TENS machine is a device that is used for the purpose of pain relief by preventing the passage of pain impulses to the brain. The TENS machine introduces pulses of low-voltage electricity into tissues for the relief of pain. A TENS machine will only include those devices which were developed primarily for the purposes of pain relief. This is contrasted with the operation of the muscle stimulation machine where there is no input of electricity or chemicals into the body. As the muscle stimulation machine is designed for and marketed as a device to prevent muscle atrophication and not for pain relief and management, it is not a TENS machine for the purpose of Item 141. Therefore, the supply is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the 'supply' satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a muscle stimulation machine.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 141
Subject references: Goods & Services Tax GST-free GST health Section 38-45 - medical aids & appliances