Private ruling: Goods and Services Tax (GST) and sales of medical devices
Date of advice: 7 February 2017
Published: July 2017

Ruling: Q1: Are the sales of medical devices GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: The sales of needles, syringes and infusion sets are GST-free under section 38-45 of the GST Act. The sales of other medical devices are taxable.

Relevant facts and circumstances: You are registered for GST. You carry on an enterprise of supplying specific medical devices to be used on in-patient in acute setting. You provided a list of medical devices that you supply and their usage.

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 subsection 38-45(1) | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3 | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3, Item 33 | A New Tax System (Goods and Services Tax) Regulations 1999 Schedule 3, Item 12

Reasons for decision: Summary: Under section 9-5 of the GST Act you make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with the indirect tax zone; and (d) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. You are selling the medical devices for monetary amounts so there are considerations provided for these supplies. Section 195-1 defines 'indirect tax zone' to mean Australia and as the sales of your products occur in Australia, these supplies are connected with the indirect tax zone. You are registered for GST and you carry on an enterprise of supplying medical devices. Thus, the sales of these products are made in the course or furtherance of an enterprise that you carry on. Therefore, your supplies of these products satisfy all the criteria of section 9-5 of the GST Act, and would be taxable supplies if there are no provisions in the GST Act that result in your supplies of these products being GST-free or input taxed. There are no provisions of the GST Act under which the supplies of medical devices are input taxed. Hence, what remains to be determined is whether the supplies of these products are GST-free. | Detailed Reasoning - Medical aids and appliances: Under subsection 38-45(1) of the GST Act a supply of medical aids and appliances is GST-free if 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); and ● specifically designed for people with an illness or disability; and ● not widely used by people without an illness or disability. The medical devices that you are supplying are for interventional medical illnesses and are to be used on in-patient in acute setting. This means these medical devices are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Therefore, if these medical devices are covered by Schedule 3 or are specified in the GST Regulations then the supplies of these medical devices would satisfy subsection 38-45(1) of the GST Act and consequently would be GST-free. Of the list of medical devices you provided, only needles and syringes are listed in Schedule 3 at item 37. In addition, infusion sets are listed in the GST Regulations at item 12 Schedule 3. As a result, the supplies of these 3 medical products are GST-free under subsection 38-45(1) of the GST Act. The supplies of all the other medical devices are subject to GST. | Detailed Reasoning - Mixed supplies: The list of medical devices that you supply includes three kits and each kit contains a number of medical devices. Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) discusses mixed supplies and composite supplies. Paragraph 16 of GSTR 2001/8 describes 'mixed supply' as a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised. Paragraph 17 of GSTR 2001/8 describes 'composite supply' as a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. It then states that you treat a composite supply as a supply of a single thing. Paragraphs 43 and 44 of GSTR 2001/8 further explain that: 43. A mixed supply is a single supply made up of separately identifiable parts, where one or more of the parts is taxable and one or more of the parts is non-taxable, and these parts are not integral, ancillary or incidental in relation to a dominant part of the supply. On the other hand, a composite supply is a single supply made up of one dominant part and other parts that are not treated as having separate identity as they are integral, ancillary or incidental to the dominant part of the supply. 44. In working out whether you are making a mixed or composite supply, the key question is whether the supply should be regarded as having more than one separately identifiable part, or whether it is essentially a supply of one dominant part with one or more integral, ancillary or incidental parts. Of the three kits that you supply, there is no one item in each kit that is the dominant item and the others are just parts that are integral, ancillary or incidental to the dominant item. Instead each kit contains distinctly separate items that need to be separately characterised for GST classification purposes. Thus, the sale of each kit is a mixed supply. Of the three kits, one kit contains medical devices which are all taxable for GST purposes. The other two kits contain a combination of GST-free and taxable medical devices. Paragraph 29 of GSTR 2001/8 provides that to calculate the value of the taxable part of a supply, you identify the parts of the supply and apportion the consideration to each part of the supply on a reasonable basis. The GST liability on each taxable part is equivalent to 1/11 of its consideration.