ATO ID 2002/301: GST and the supply of an indirect calorimeter
Date of decision: 18 December 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 an indirect calorimeter?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an indirect calorimeter. 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 is supplying an indirect calorimeter. The indirect calorimeter is a device whose primary function is to measure a person's energy expenditure. In the course of this function, the device also measures how much oxygen is inhaled and exhaled by that person. The entity promotes the device for use in nutritional research. For instance, the device can be used to provide a comparative analysis of energy expenditure between healthy and sick subjects. The entity is registered for goods and services tax (GST)

Reasons for decision
Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance to the status of the indirect calorimeter is item 137 in the table in Schedule 3 (Item 137), which lists 'breathing monitors'. Indirect calorimeters are not specified in the GST Regulations. The term 'breathing monitors' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it 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). The health industry considers a breathing monitor to be a device with the primary purpose of measuring a patient's breathing in circumstances where such monitoring is essential (eg the patient is unconscious, under an anaesthetic etc). Although the indirect calorimeter does measure the level of oxygen breathed in and out during a person's breathing cycle, the primary purpose of the device is to measure how much energy the person is expending. Furthermore, the device is not used to monitor a person's breathing in situations where the person is unconscious or under an anaesthetic, but rather is used in nutritional research. As such, it is considered that the indirect calorimeter system is not a 'breathing monitor' and is not covered by Item 137. As the indirect calorimeter is not covered by Schedule 3, the supply of the machine is not GST-free 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 not GST-free under any of the other provisions in Division 38 of the GST Act nor is it 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 indirect calorimeter.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Schedule 3 Schedule 3 table item 137 Division 40
Subject references: Goods and services tax GST free GST health Section 38-45 - medical aids & appliances