Private ruling: GST and importation of compression stockings
Published: January 2012

Ruling: Q1: Is the importation of compression stockings a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: No.

Relevant facts and circumstances: · You are a distributor for particular Compression Stockings (the stockings). You import the stockings directly from the manufacturing company overseas. · The stockings are used for the treatment or prevention of medical problems. In particular, they are designed for people with chronic venous insufficiency and/or lymphoedema, people who are bed ridden for extended periods of time, and for the post surgical treatment of deep vein thrombosis. · The stockings are medical grade stockings which are designed to help stimulate the flow of lymph fluid and increase blood circulation. · The stockings are used in hospitals and ulcer clinics and are prescribed for use by vascular surgeons, physicians, general practitioners, dermatologists and lymphoedema therapists. Obstetricians often prescribe these stockings for pregnant women with varicosities and pain in their legs. · The compression stockings are not very attractive and are not easy to apply or remove as they are designed for people with medical conditions as described above. · The compression stockings are divided into classes to identify compression strengths. They are classified as Class 1, 2 or 3 according to the pressure rating which is recorded in mmHg (millimetres of mercury). The higher the number, the greater the therapeutic support as those stockings have a higher pressure rating. You have advised that the stockings range from 15mmHg to 40+mmHg. · You have drawn our attention to a ruling issued to another importer of the same products, and have provided reference details for this ruling. We have taken some of the facts provided in that ruling into consideration in making our decision, on the assumption that the products are exactly the same and were accurately described in that ruling.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5, | A New Tax System (Goods and Services Tax) Act 1999 section 13-5, | A New Tax System (Goods and Services Tax) Act 1999 section 13-10, | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1), | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(2) and | A New Tax System (Goods and Services Tax) Act 1999 section 42-5.

Reasons for decision: Summary: The importation of compression stockings is not a taxable importation under section 13-5 of the GST Act. The importation is a non-taxable importation under section 13-10 of the GST Act. | Detailed Reasoning - Detailed reasoning: Under section 13-5 of the GST Act, an entity makes a taxable importation if: · goods are imported, and · the entity enters the goods for home consumption within the meaning of the Customs Act 1901 (Customs Act). However, an importation is not a taxable importation to the extent that it is a non-taxable importation. Goods and Services Tax Ruling GSTR 2003/15 entitled Goods and services tax: importation of goods into Australia provides the ATO view and guidance on the importation of goods into Australia. Paragraph 20 of GSTR 2003/15 explains that the Customs Act requires imported goods to be entered for home consumption, warehousing or transhipment. The 'owner' of the goods must provide Customs with specific information in a specified format (the 'customs entry'). If goods are entered for home consumption, the 'owner' must pay any customs duty to Customs at the time of entry of the goods. You have advised that you import the compression stockings directly from the manufacturers overseas to your Australian office for distribution. As such, you are importing goods for home consumption within the meaning of the Customs Act and will, therefore, be making a taxable importation unless the importation is a non-taxable importation. Section 13-10 of the GST Act provides that an importation is a non-taxable importation if: · it is a non-taxable importation under Part 3-2 of the GST Act (which contains only Division 42 of the GST Act), or · it would have been a supply that was GST-free or input taxed if it had been a supply. Part 3-2 of the GST Act and in particular, section 42-5 of the GST Act deals with the importation of goods that are non-taxable importations in accordance with the Customs Tariff Act 1995 . The importation of the compression stockings by the Trust does not satisfy the requirements of any of the items in Division 42 of the GST Act for a non-taxable importation. However, an importation is also a non-taxable importation to the extent that, had it been a supply, the supply would have been GST-free or input taxed. There are no provisions in the GST Act that would make the supply of the compression stockings input taxed. It is therefore necessary to determine whether the supply of the compression stockings would be GST-free. Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where it: · is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) · is specifically designed for people with an illness or disability, and · is not widely used by people without an illness or disability. The supply of a medical aid or appliance that meets all the three elements of subsection 38-45(1) of the GST Act will be GST-free. The supply will be GST-free all the way through the supply chain, and not only when supplied to a person with an illness or disability. Item 14 in the table in Schedule 3 to the GST Regulations lists 'compression garments'. We consider that compression garments are garments which exert sufficient pressure on the wearer to be of therapeutic benefit. They are commonly used by lymphoedema and burns sufferers. The garment must be manufactured with the materials, features, technology and fabrics that are ideal for providing constant and consistent compression, at the correct pressure, to the patient. In this case, the compression stockings are medical grade stockings which are designed to help stimulate the flow of lymph fluid and increase blood circulation. They are used for the treatment of various medical conditions by having compression applied. The information you have provided indicates that the compression stockings exert sufficient pressure to be of therapeutic benefit to the wearer. In addition, you have advised that the compression stockings are not very attractive and are not easy to apply or remove. Only people who require them will purchase them, and they are prescribed for such people. From the information you have provided the compression stockings are specifically designed for people with an illness or disability, and would not be widely used by people without an illness or disability. As the compression stockings satisfy all the elements of subsection 38-45(1) of the GST Act, its supply will be GST-free. Consequently, the importation of the compression stockings satisfies the requirements of a non-taxable importation under section 13-10 of the GST Act. As such, the importation is not subject to GST.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.