ATO ID 2002/534: GST and blood coagulation test strips
Date of decision: 10 January 2002
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 blood coagulation test strips?

Decision
Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies blood coagulation test strips.

Facts
The entity is a supplier of medical aids and appliances. The entity is supplying test strips that measure blood coagulation levels for people with heart conditions or blood disorders. The test strips are specifically designed for this purpose and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply 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(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Medical aids and appliances which are GST-free under subsection 38-45(1) are GST-free at all points in the supply chain from the point in time when they become those listed items, and not only when supplied to a person with an illness or disability. Item 36 in the table in Schedule 3 (Item 36) lists 'test strips' and this item is listed under the category heading of 'Diabetes'. In the present circumstances, the test strips are for use by people suffering from heart conditions or blood disorders rather than for use by people with diabetes. However, section 182-15 of the GST Act provides that the second column of Schedule 3 (the column in which 'Diabetes' is listed), is not operative and can only be considered for the purposes for which an explanatory section may be considered under subsection 182-10(2) of the GST Act. An explanatory section may only be considered: The meaning of the phrase 'test strip' is clear and unambiguous. It is not necessary to consider the category heading in the second column for any of the purposes listed in subsection 182-10(2) of the GST Act to interpret the meaning of 'test strip'. This means that Item 36 is not restricted to diabetes test strips and covers the blood coagulation test strips. The test strips are specifically designed for people with an illness or disability (heart conditions or blood disorders). In addition, the test strips are not widely used by people who do not have an illness or disability. Therefore, as all of the requirements of subsection 38-45(1) of the GST Act are satisfied, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies blood coagulation test strips.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-45(1) Schedule 3 Schedule 3 table item 36 subsection 182-10(2) section 182-15
Subject references: Goods & services tax GST health Section 38-45 - medical aids & appliances