ATO ID 2001/355: GST and slip-on sunglasses
Date of decision: 23 August 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of sunglasses, 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 sells slip-on sunglasses?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells slip-on sunglasses.

Facts
The entity is a supplier of sunglasses. The entity is selling slip-on sunglasses. The slip-on sunglasses fit in behind the lenses of prescription glasses. They are only used in conjunction with prescription glasses. The slip-on sunglasses have no corrective prescription incorporated in them. 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 certain medical aids and appliances is GST-free where the medical aid or appliance: The only item of relevance to this case is item 155 in the table in Schedule 3 (Item 155). Item 155 lists lenses for prescription spectacles. The slip-on sunglasses are not specified in the GST Regulations. The term 'prescription spectacles' is not defined in the GST Act. Pursuant to the rules of statutory interpretation, a term will take on its ordinary meaning unless the term has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In this case, given the context in which the phrase appears, the phrase is considered to have a special or technical meaning. Dorland's Medical Dictionary (2000) defines the words 'prescription' as a 'written direction for the preparation and administration of a remedy'. The word 'spectacles' is defined as 'a pair of lenses in a frame to assist vision'. Accordingly, it is considered that 'prescription spectacles' are a pair of lenses in a frame provided in accordance with a prescription and further, it is considered that the prescription must be by an appropriately qualified person (eg an optometrist) for the purpose of remedying a defect. It is considered that lenses, which have some part of a corrective prescription incorporated in them and have no other use than finishing and incorporation into prescription spectacles, are lenses for prescription spectacles for the purposes of subsection 38-45(1) of the GST Act. Where the lenses do not have a corrective prescription incorporated in them, they do not satisfy the meaning of the phrase 'lenses for prescription spectacles'. The slip-on sunglasses do not have a corrective prescription incorporated in them. Therefore, they are not covered by Item 155, lenses for prescription spectacles. Consequently, the supply of the slip-on sunglasses is not a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets 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 the slip-on sunglasses.

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 155
Case references: Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222
Other references: Dorland's Medical Dictionary, 2000, 29th edition, Newman W. Dorland, WB Saunders, London.
Subject references: GST-free GST health Medical aids & appliances