Private ruling: Goods and Services Tax (GST) and sales of medical appliances
Date of advice: 17 February 2017
Published: July 2017

Ruling: Q1: Are your supplies of mattresses and bedding products designed for babies and infants with common medical conditions or disorders or injuries that lead to medical illnesses and potential suffocation GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, your supplies of mattresses and bedding products designed for babies and infants with common medical conditions or disorders or injuries that lead to medical illnesses and potential suffocation are GST-free under section 38-45 of the GST Act.

Relevant facts and circumstances: You are registered for GST. You carry on an enterprise of supplying health care and bedding products in Australia. You plan to supply a particular range of mattresses and specialised sheets and cover sheets in Australia. These products are registered as therapeutic goods in Australia. These products have been specifically designed for use by, and will normally only be used by, new born babies and infants who suffer from common medical conditions or those who have disorders or injuries that lead to medical illnesses and potential suffocation. Some of the products are hospital grade models, which are only use in hospitals, with additional features that allow for specialised treatments for babies or infants while undergoing treatment in a hospital. These products are normally first used for babies and infants in hospitals. If the baby or infant is still suffering from an illness or disability at the end of its hospital stay, or it is required to come back for outpatient treatment at hospital or ongoing treatment or monitoring by an independent medical practitioner, then a doctor or health care professional will recommend that the parents/guardians acquire a domestic model for use by the baby/infant at home. These products will be sold with specification sheets and Therapeutic Goods Certificates with specific instructions on the correct and safe use for the babies/infants. These products are designed for use, and must be used, in a very specific way. Each mattress of this range is specifically designed with a 'nest' incorporated into it which provides a unique shape to and space within the mattress. The 'nest' is also made of special material that allows the flow of air. This does not occur with a normal mattress. Due to the design of the mattress, it will be sold together with the same brand cover sheet as a normal cover sheet will not allow the mattress to work properly. Only a specialised cover sheet of this range will allow the mattress to work properly.

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 Schedule 3 | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3, Item 66

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. Your supply of these products will satisfy section 9-5 in that you make a supply for consideration, the supply is made in the course or furtherance of an enterprise that you carry on, the supply is connected with the indirect tax zone as it is done in Australia and you are registered for GST. However, it remains to determine if your supplies of these products are GST-free or input taxed. There are no provisions of the GST Act that would result in your supply being 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 products that you are supplying are specifically designed for use by, and will normally only be used by, babies and infants who suffer from common medical conditions or disorders or injuries that lead to medical illnesses and potential suffocation. This means these products 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 products are covered by Schedule 3 or are specified in the GST Regulations then their supplies would satisfy subsection 38-45(1) of the GST Act and consequently would be GST-free. Item 66 of Schedule 3 (item 66) lists pressure management mattresses and overlays. The mattresses that you supply are covered by item 66 as these products are specifically designed to manage and provide pressure relief for babies or infants suffering from common medical conditions, disorders or injuries that lead to medical illnesses or potential suffocation. The term 'overlays' is not defined in the GST Act and therefore takes the ordinary meaning. The Macquarie Dictionary , 2001, Revised 3 rd edition, The Macquarie Library Pty Ltd, New South Wales defines 'overlay' as, amongst other things, 'something laid over something else; a covering'. The specialised sheets are for hospital use only and are laid on top of the mattresses to allow for specialised treatments to babies and infants while in hospital. Similarly, the cover sheets are specifically designed as coverings for the mattresses to ensure the mattresses work properly. Due to the special design of the mattress with a nest incorporated to provide unique shape and space and to allow airflow, normal bed covers will not enable these functions to work properly. Thus, each supply of the mattress includes a single cover sheet of appropriate size to ensure the mattress is used properly. In this circumstance, the specialised sheets and the cover sheets for these mattresses are also covered by item 66. As a result, the supplies of these products are GST-free under subsection 38-45(1) of the GST Act.