Private ruling: GST and supply of support garments
Published: March 2012

Ruling: Q1: Is the supply of support garments a GST-free supply under Subdivision 38-B of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the supply of support garments are GST-free under Subdivision 38-B of the GST Act.

Relevant facts and circumstances: You are a supplier of support garments. The garments provide therapeutic benefits to persons suffering illness and disability and have been specifically designed with input from health professionals. They are generally recommended and prescribed for use by medical and health professionals. They are made from fabric that has been specifically tested and developed to provide support. The garments are not commonly used by people without a medical condition. They cost $xx. The garments are packaged with descriptions of medical conditions for which they may be used and are described by the TGA as compression garments. You are registered for the goods and services tax (GST).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act section 9-5 | A New Tax System (Goods and Services Tax) Act section 9-40 | A New Tax System (Goods and Services Tax) Act subsection 38-45(1) | A New Tax System (Goods and Services Tax) Act section 195-1

Reasons for decision: Summary: Under subsection 7-1(1) of the GST Act, GST is payable on taxable supplies and taxable importations. Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make. You make a taxable supply when you satisfy the requirements of section 9-5 of the GST Act which states: You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; and · 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. (* denotes a term that is defined in section 195-1 of the GST Act). Your supplies of the garments satisfy the requirements of a taxable supply in section 9-5 of the GST Act. That is, you make your supplies of the garments for consideration in the course of the enterprise that you carry on. Additionally, your supplies are connected with Australia and you are registered for GST. There are no provisions in the GST Act that would make your supplies of the garments input taxed. Therefore, it remains to be determined whether your supplies are GST-free. Subdivision 38-B of the GST Act provides that certain goods and services relating to health are GST-free. Of relevance to this case is subsection 38-45(1) of the GST Act which provides that the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: · 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. All the above requirements must be satisfied for a medical aid or appliance to be GST-free. A medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act will be GST-free all the way down the supply chain and not only when supplied to a person with an illness or disability. | Detailed Reasoning - First requirement: The first requirement in subsection 38-45(1) of the GST Act is that the medical aid or appliance must be listed in the table in Schedule 3 to the GST Act or in the table to Schedule 3 to the GST Regulations. There are no items in the table in Schedule 3 to the GST Act that cover the garments that you supply. However, item 14 in the table in Schedule 3 to the GST Regulations (Item 14) lists 'compression garments'. The ATO considers 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. Accordingly, it is necessary to consider whether the garments you supply are covered by Item 14. The garments in this case are made from fabric that have been specifically tested and developed to provide support. The information provided indicates that the garments provide sufficient support and compression to be of therapeutic benefit to the wearer. As such, these garments are covered by Item 14 and the first requirement in subsection 38-45(1) of the GST Act is satisfied. Additionally, the TGA also describes the garments as compression garments. | Detailed Reasoning - Second requirement: The second requirement in subsection 38-45(1) of the GST Act is that the medical aid or appliance must be specifically designed for people with an illness or disability. In determining whether a medical aid or appliance is specifically designed for people with an illness or disability, reference should be made to the manufacturer's intention of how the product is to be used and its features. Indicators of the manufacturer's intention of how a product is to be used include how the product is marketed and the type of retail outlets at which they are purchased. The garments are specifically designed to provide therapeutic benefits to persons suffering from illness or disability. As such, they satisfy the second requirement in subsection 38-45(1) of the GST Act. | Detailed Reasoning - Third requirement: The third requirement in subsection 38-45(1) of the GST Act is that the thing is not widely used by people without an illness or disability. In determining whether a medical aid or appliance is widely used by people without an illness or disability, reference should be made on how the wider community uses the relevant product. That is, the common purpose for which the product is purchased. It is not the actual use for which a product is purchased that is important but the purpose for which the wider community purchases the product. The garments are generally recommended and prescribed for use by medical and health professionals and they are not commonly used by people without a medical condition. They are also packaged with descriptions of medical conditions for which they may be used. Having regard to all the information provided including the price of the garments, it is our view that these garments would generally only be used by people who require them. As such, they would not commonly be used by the wider community. Therefore, the garments satisfy the third requirement in subsection 38-45(1) of the GST Act. | Detailed Reasoning - Conclusion: As the garments satisfy all the requirements of subsection 38-45(1) of the GST Act, the supply will be GST-free.

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