GST and a supply of a chrome cobalt frame used to make a denture

Is the entity, a casting laboratory, making a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of a chrome cobalt frame which is used to make a denture?

No, the entity is not making a GST-free supply under section 38-45 of the GST Act when it makes a supply of a chrome cobalt frame which is used to make a denture. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a casting laboratory. The entity makes a supply of a chrome cobalt frame which is used to make a denture. The entity supplies the chrome cobalt frame to a dental laboratory.

The chrome cobalt frame is not used to replace a faulty, worn or broken part of a GST-free denture.

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 a medical aid and appliance 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); and • is specifically designed for people with an illness or disability; and • is not widely used by people without an illness or disability.

A chrome cobalt frame for a denture is not covered in Schedule 3 or the GST Regulations. Therefore, the supply of a chrome cobalt frame is not GST-free under subsection 38-45(1) of the GST Act.

Subsection 38-45(2) of the GST Act provides that spare parts, that are specifically designed as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act are also GST-free.

The term 'spare part' is not defined in the GST Act. Therefore, it is given its ordinary meaning. The Macquarie Dictionary (1997) defines a spare part as 'a part which replaces a faulty, worn, or broken part of a machine....'.

On this basis, it is considered that a supply of a part that can be used to replace a faulty, worn, or broken part of another thing, is a spare part under subsection 38-45(2) of the GST Act, provided that the part supplied is specifically designed for another thing, the supply of which is GST-free under subsection 38-45(1) of the GST Act.

In this case, a chrome cobalt frame is not considered to be a spare part because it is not supplied to replace a faulty, worn, or broken part of a GST-free denture. Furthermore, a chrome cobalt frame is not specifically designed as a spare part for a GST-free denture. Therefore, the supply of a chrome cobalt frame is not GST-free under subsection 38-45(2) of the GST Act.

The supply of a chrome cobalt frame used to make a denture is not GST-free under subsections 38-45(1) or 38-45 (2) 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 a chrome cobalt frame used to make a denture. [Note: Section 38-10 of the GST Act provides that, in certain circumstances, supplies of other health services and goods supplied during those health services are GST-free. However, in this case, section 38-10 of the GST Act does not apply to the supply made by the entity to the dentist. Paragraph 38-10(1)(c) of the GST Act requires that the entity provides 'appropriate treatment' to the recipient of the supply. It is considered that appropriate treatment is provided when a recognised professional assesses the recipient's state of health and determines a process to pursue, in an attempt to preserve, restore or improve the physical or psychological wellbeing of that recipient insofar as that recognised professional's particular area of training allows and will include subsequent supplies for the determined process. In this case, the entity is not providing 'appropriate treatment' to the dentist.]