GST and the supply of rain water tank liners

Is the entity, a supplier of rain water tank liners, making a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies rain water tank liners to a recipient who requires the liners due to a pre-existing medical condition?

No, the entity is not making a GST-free supply under Division 38 of the GST Act when it supplies rain water tank liners to a recipient who requires the liners due to a pre-existing medical condition. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a supplier of rain water tank liners. The entity supplies rain water tank liners to a recipient who has a pre-existing medical condition. The medical condition requires the recipient to use purified, filtered or rain water for drinking and washing. The recipient installed two rain water tanks which require tank liners. The tank liners are replaced from time to time.

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

Division 38 of the GST Act sets out the requirements for supplies to be GST-free. Of relevance to this case are subsections 38-45(1) and 38-285(1) 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); • is specifically designed for people with an illness or disability; and • is not widely used by people without an illness or disability.

Water tank liners are not listed in Schedule 3 and are not specified in the GST Regulations. Therefore, they are not GST-free under subsection 38-45(1) of the GST Act.

However, it is necessary to consider if they are GST-free under subsection 38-285(1) of the GST Act which deals with the supply of water.

Under subsection 38-285(1) of the GST Act, a supply of water is GST-free. In this case, the entity does not supply water. It supplies water tank liners. In addition, paragraph 31 of Goods and Services Tax Ruling GSTR 2000/25 states that a supply that enables an end recipient to use, store or treat water, once it has been supplied, is not a supply of water. Therefore, subsection 38-285(1) of the GST Act is not applicable.

The entity is registered for GST and the supply satisfies 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 water tank liners to a recipient who requires the liners due to a pre-existing medical condition.