ATO ID 2001/216: GST and spare parts for medical aids and appliances
Date of decision: 19 June 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of parts, 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 a part for a GST-free medical aid, where that part is a generic component designed for various uses?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies a part for a GST-free medical aid, where that part is a generic component designed for various uses. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of parts. The entity is supplying a part to replace a worn component of a medical aid. The supply of the medical aid is GST-free under subsection 38-45(1) of the GST Act. The part is generic and can be used as a part in many appliances other than the medical aid. 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: Subsection 38-45(2) of the GST Act provides that 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, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...' In this case, the part is supplied to replace a worn component of a medical aid. As such, the part is considered to be a 'spare part' for the purposes of the GST Act. Furthermore, as the part is supplied as a spare part for a medical aid that is GST-free under subsection 38-45(1) of the GST Act; the supply satisfies the first requirement in subsection 38-45(2) of the GST Act. However, as the spare part is a generic component that can be used as a spare part for many appliances, it is considered that it is not specifically designed as a spare part for the GST-free medical aid in question. Therefore, as the supply does not meet the second requirement in subsection 38-45(2) of the GST Act, the entity is not making a GST-free supply of a spare part. In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act; the entity is making a taxable supply under section 9-5 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40
Related ATO interpretative decisions: ATO ID 2001/210
Other references: The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales. GST Pharmaceutical Health Forum - Issue 1.g
Subject references: Goods & services tax GST free GST health Medical aids & appliances GST supplies & acquisitions Taxable supply