GST and slip-on sunglasses

Is the entity, a supplier of sunglasses, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells slip-on sunglasses?

No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells slip-on sunglasses.

The entity is a supplier of sunglasses. The entity is selling slip-on sunglasses. The slip-on sunglasses fit in behind the lenses of prescription glasses. They are only used in conjunction with prescription glasses. The slip-on sunglasses have no corrective prescription incorporated in them.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Under subsection 38-45(1) of the GST Act, 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 2019 (GST Regulations); and • is specifically designed for people with an illness or disability; and • is not widely used by people without an illness or disability.

The only item of relevance to this case is item 155 in the table in Schedule 3 (Item 155). Item 155 lists lenses for prescription spectacles. The slip-on sunglasses are not specified in the GST Regulations.

The term 'prescription spectacles' is not defined in the GST Act. Pursuant to the rules of statutory interpretation, a term will take on its ordinary meaning unless the term has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).

In this case, given the context in which the phrase appears, the phrase is considered to have a special or technical meaning. Dorland's Medical Dictionary (2000) defines the words 'prescription' as a 'written direction for the preparation and administration of a remedy'. The word 'spectacles' is defined as 'a pair of lenses in a frame to assist vision'.

Accordingly, it is considered that 'prescription spectacles' are a pair of lenses in a frame provided in accordance with a prescription and further, it is considered that the prescription must be by an appropriately qualified person (eg an optometrist) for the purpose of remedying a defect.

It is considered that lenses, which have some part of a corrective prescription incorporated in them and have no other use than finishing and incorporation into prescription spectacles, are lenses for prescription spectacles for the purposes of subsection 38-45(1) of the GST Act. Where the lenses do not have a corrective prescription incorporated in them, they do not satisfy the meaning of the phrase 'lenses for prescription spectacles'.

The slip-on sunglasses do not have a corrective prescription incorporated in them. Therefore, they are not covered by Item 155, lenses for prescription spectacles.

Consequently, the supply of the slip-on sunglasses is not a GST-free supply under subsection 38-45(1) of the GST Act.

The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the slip-on sunglasses.

Date of Amendment Part Comment 9 April 2019 Throughout Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 .

Date of Amendment | Part | Comment

9 April 2019 | Throughout | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 .