Private ruling: GST and paper used for ECG machines
Published: July 2012

Ruling: Q1: Is the supply of paper used in connection with ECG or similar machines GST-free? | A1: Yes, the supply of paper used in connection with ECG or similar machines is GST-free

Relevant facts and circumstances: You are registered for goods and services tax (GST). You supply cardiograph recording paper to be used in ECG and similar machines. The machines are used by hospitals and other medical centres to record and monitor a patients heart rate. The papers are specialised in that different machines require different types of paper. The paper allows the medical practitioner to keep a record of the patient's heart condition as determined by the machine. You supply the paper for use in the machines, but not the machines. There is no agreement between you and your customers to not treat your supplies as GST-free.


Reasons for decision: Summary: Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the supplies that are GST-free. Subsection 38-45(1) of the GST Act provides that a supply is GST-free if: (a) 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 (b) the thing supplied is specifically designed for people with an illness or disability, and not widely used by people without an illness or disability. Paragraph 38-45(1)(a) is satisfied where the item is covered under Schedule 3. The relevant item number in relation to the ECG machines is item 1 in the table in Schedule 3 to the GST Act (Item 1), which list 'heart monitors'. The term 'heart monitors' is not defined in the GST Act. The Stedman's Medical Dictionary (2000), 27 th edition, Lippincott Williams & Williams, Baltimore, defines a cardiac (heart) monitor as 'an electronic monitor which, when connected to the patient, signals each heart beat with a flashing light, an electrocardiograph curve, an audible signal, or all three'. Accordingly, a device with a primary function of monitoring a patient's heartbeat, is a heart monitor and is covered by Item 1. You advised that ECG machines are designed for people with an illness or disability and are not widely used by people without an illness or disability. Therefore, the second and third requirements of subsection 38-45(1) of the GST Act are also met. A supply of an ECG machine is therefore GST-free under subsection 38-45(1) of the GST Act. You have advised that you supply paper for use in connection with ECG and other machines. You do not, however, supply the machines themselves. A supply of paper is not a supply of a medical aid or appliance and does not satisfy the requirements of subsection 38-45(1) of the GST Act. However, under subsection 38-45(2) of the GST Act, a supply will be GST-free where: · the thing supplied is supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act, and · the thing is specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act. The term 'spare part' is not defined in the GST Act. The Macquarie Dictionary (2001), 5 th edn, defines a spare part, amongst other things as 'a part which replaces a faulty, worn, or broken part of a machine.' On this basis we consider that a supply of a part that can be used to replace a faulty, worn, or broken part of another thing, will be GST-free under subsection 38-45(2) of the GST Act, provided that the part supplied is specifically designed as a spare part for a medical aid or appliance the supply of which is GST-free under subsection 38-45(1) of the GST Act. Under this interpretation, it is not necessary to determine that the part is being supplied in order to replace a faulty, worn or broken part of another thing the supply of which would be GST-free under subsection 38-45(1) of the GST Act. The fact that the part can be used to replace a faulty, worn, or broken part of another thing the supply of which would be GST-free under subsection 38-45(1) of the GST Act is sufficient to establish that the supply is GST-free under subsection 38-45(2) of the GST Act. However, where a spare part is a generic component that can be used as a spare part for many appliances, it is considered that it is not specifically designed as a spare part for the GST-free medical aid in question. The supply of a generic component may meet the first requirement of subsection 38-45(1) of the GST Act when it is supplied as a spare part for a GST-free medical aid or appliance. However, the supply of a generic component will not meet the second requirement of subsection 38-45(2) of the GST Act as it is not specifically designed as a spare part for a medical aid or appliance the supply of which is GST-free under subsection 38-45(1) of the GST Act. Therefore, the supply of a generic component will be a taxable supply and subject to GST if the other requirements of section 9-5 of the GST Act are met You have advised that the paper you supply is specialised in that different machines require different types of paper. The paper is therefore not a generic component and the requirements of subsection 38-45 (2) of the GST Act are satisfied. The supply of the paper is a supply of a spare part for an ECG machine. The supply of an ECG machine is a GST-free supply of a medical aid or appliance. Therefore, the supply of this specialised paper is GST-free.

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