Private ruling: GST and the supply of a product (Product)
Published: January 2013

Ruling: Q1: Will your supply of the Product be subject to goods and services tax (GST)? | A1: Yes.

Relevant facts and circumstances: · You are registered for GST. · You are to sell the Product. · The Product is used for medical reasons. · The Product has been registered with the Therapeutic Goods Administration. · You are to sell the Product to individuals who will use the Product for their personal use and to entities that will use the Product in carrying on their enterprise. · The Product will not be sold under prescription.

Relevant legislative provisions: Subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with medical aids and appliances. It provides that a supply of a medical aid or appliance will be GST-free if the medical aid or appliance satisfies the following three conditions: | · it is covered by Schedule 3 of the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) · it is specifically designed for people with an illness or disability, and | · it is not widely used by people without an illness or disability. | Further to this, subsection 38-45(2) of the GST Act provides that the supply of a good that has been specifically designed as a spare part for a GST-free medical aid or appliance would also be GST-free. | Given the Product could be considered as a medicinal preparation, it is also necessary to consider section 38-50 of the GST Act as this provision outlines the circumstances in which the supply of a drug or medicinal preparation would be GST- free. | There are no clauses in the GST Regulations that are relevant to this Product. Medical aids or appliances | The Product has been designed to be used for medical reasons. Given this, the ATO accepts that the Product is specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. It is therefore only necessary to determine if it is covered by Schedule 3. | Of all the items listed in Schedule 3, the only relevant items to consider are Item 15, u rine/faecal drainage/collection devices , Item 20, i ncontinence appliances and Item 110, patient control analgesia . | Item 15 - Urine/faecal drainage/collection devices | Item 15 of Schedule 3 specifically covers devices whose principal purpose is the collection of the above named bodily waste products. As such, this item would capture things such as catheters, tubing and drainage bags. The Product is in itself not an actual collection device and therefore is not captured by this item. | Item 20 - Incontinence appliances | The word appliance is not defined in the GST Act therefore takes on its ordinary meaning. Appliance is defined in the Macquarie Dictionary (3rd edition) as: … a mechanical apparatus or device designed to assist a disabled person . | Given this definition, Item 20 of Schedule 3 is intended to capture products such as mechanical equipment, specially designed clothing or similar type products that are principally used to treat incontinence. | The Product is not a mechanical device or apparatus and as such would not be captured by this item. | Item 110, patient control analgesia | Item 110 of Schedule 3 is captured under the general category of pain relief delivery systems. As such, patient controlled analgesia is a mechanical system of medicine delivery that allows a patient to safely and continuously manage their own pain relief through some mechanism (generally a pump having attached tubing). The system is operated by the patient and normally has inbuilt limits to ensure that the doses cannot be provided too close together and cannot exceed a certain amount within a specified period. | Given this, the Product cannot be considered a system of pain relief delivery and as such, the Product is not captured by this item. | Spare part | The Product is not specifically designed as a spare part for a GST-free medical aid or appliance and is therefore not GST-free under subsection 38-45(2) of the GST Act. Medicinal preparation | A drug or medicinal preparation is GST-free under section 35-50 of the GST Act provided certain requirements are met. Generally, to be GST-free under this provision the drug or medicinal preparation has to be restricted in some way. For example, its supply is on prescription or it must be supplied by a medical practitioner, dental practitioner or pharmacist (or a person permitted under that law to do so). The drug or medicinal preparation must also be supplied to an individual for their private or domestic use or consumption (subsection 38-50(7) of the GST Act). | The Product is not sold under prescription. Therefore The only subsection of section 38-50 of the GST Act that is of relevance is subsection 38-50(5) which provides that a supply of a drug or medicinal preparation is GST-free if: | · the drug or medicinal preparation is an analgesic that has a single active ingredient the supply of which as a drug or medicinal preparation would be GST-free under subsection 38-50 (2) of the GST Act if it were supplied in a larger quantity; and · the drug or medicinal preparation is of a kind the supply of which is declared by the Health Minister to be GST-free, by determination in writing. | In this case, the Product is not a drug or medicinal preparation that has been determined in writing by the Health Minister to be GST-free. Hence, your supply of the Product would not be GST-free under section 38-50 of the GST Act. | Given this, your supply of the Product will be taxable under section 9-5 of the GST Act. Disclaimer | You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf. | The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies. | The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

Reasons for decision: Detailed Reasoning - Relevant legislative provisions: Subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with medical aids and appliances. It provides that a supply of a medical aid or appliance will be GST-free if the medical aid or appliance satisfies the following three conditions: · it is covered by Schedule 3 of the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) · it is specifically designed for people with an illness or disability, and · it is not widely used by people without an illness or disability. Further to this, subsection 38-45(2) of the GST Act provides that the supply of a good that has been specifically designed as a spare part for a GST-free medical aid or appliance would also be GST-free. Given the Product could be considered as a medicinal preparation, it is also necessary to consider section 38-50 of the GST Act as this provision outlines the circumstances in which the supply of a drug or medicinal preparation would be GST- free. There are no clauses in the GST Regulations that are relevant to this Product. | Detailed Reasoning - Medical aids or appliances: The Product has been designed to be used for medical reasons. Given this, the ATO accepts that the Product is specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. It is therefore only necessary to determine if it is covered by Schedule 3. Of all the items listed in Schedule 3, the only relevant items to consider are Item 15, u rine/faecal drainage/collection devices , Item 20, i ncontinence appliances and Item 110, patient control analgesia . | Detailed Reasoning - Item 15 - Urine/faecal drainage/collection devices: Item 15 of Schedule 3 specifically covers devices whose principal purpose is the collection of the above named bodily waste products. As such, this item would capture things such as catheters, tubing and drainage bags. The Product is in itself not an actual collection device and therefore is not captured by this item. | Detailed Reasoning - Item 20 - Incontinence appliances: The word appliance is not defined in the GST Act therefore takes on its ordinary meaning. Appliance is defined in the Macquarie Dictionary (3rd edition) as: … a mechanical apparatus or device designed to assist a disabled person . Given this definition, Item 20 of Schedule 3 is intended to capture products such as mechanical equipment, specially designed clothing or similar type products that are principally used to treat incontinence. The Product is not a mechanical device or apparatus and as such would not be captured by this item. | Detailed Reasoning - Item 110, patient control analgesia: Item 110 of Schedule 3 is captured under the general category of pain relief delivery systems. As such, patient controlled analgesia is a mechanical system of medicine delivery that allows a patient to safely and continuously manage their own pain relief through some mechanism (generally a pump having attached tubing). The system is operated by the patient and normally has inbuilt limits to ensure that the doses cannot be provided too close together and cannot exceed a certain amount within a specified period. Given this, the Product cannot be considered a system of pain relief delivery and as such, the Product is not captured by this item. | Detailed Reasoning - Spare part: The Product is not specifically designed as a spare part for a GST-free medical aid or appliance and is therefore not GST-free under subsection 38-45(2) of the GST Act. | Detailed Reasoning - Medicinal preparation: A drug or medicinal preparation is GST-free under section 35-50 of the GST Act provided certain requirements are met. Generally, to be GST-free under this provision the drug or medicinal preparation has to be restricted in some way. For example, its supply is on prescription or it must be supplied by a medical practitioner, dental practitioner or pharmacist (or a person permitted under that law to do so). The drug or medicinal preparation must also be supplied to an individual for their private or domestic use or consumption (subsection 38-50(7) of the GST Act). The Product is not sold under prescription. Therefore The only subsection of section 38-50 of the GST Act that is of relevance is subsection 38-50(5) which provides that a supply of a drug or medicinal preparation is GST-free if: · the drug or medicinal preparation is an analgesic that has a single active ingredient the supply of which as a drug or medicinal preparation would be GST-free under subsection 38-50 (2) of the GST Act if it were supplied in a larger quantity; and · the drug or medicinal preparation is of a kind the supply of which is declared by the Health Minister to be GST-free, by determination in writing. In this case, the Product is not a drug or medicinal preparation that has been determined in writing by the Health Minister to be GST-free. Hence, your supply of the Product would not be GST-free under section 38-50 of the GST Act. Given this, your supply of the Product will be taxable under section 9-5 of the GST Act. | Detailed Reasoning - Disclaimer: You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf. The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies. The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

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