GST and modifying an individual's surgical shoes

Is the entity, a supplier of footwear, 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 supplies a service of modifying an individual's surgical shoes?

No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a service of modifying an individual's surgical shoes. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a supplier of footwear. The entity also supplies services to modify shoes.

The entity is not a practitioner of any of the other health services listed in the table in subsection 38-10(1) of the GST Act.

An individual required modifications to be made to their surgical shoes. The individual provides their shoes and the specifications for the modifications to the entity. The entity then modifies the individual's surgical shoes to the specifications. Any goods that may be provided as part of the modification process are merely ancillary to the modification service.

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 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 • the thing supplied is not widely used by people without an illness or disability.

Item 41 in the table in Schedule 3 lists 'surgical shoes, boots, braces and irons'.

However, the entity is not supplying the shoes. The entity is supplying a service of modifying the entity's surgical shoes. There is no item in the table in Schedule 3 that covers the modification of an existing shoe. Therefore, the entity is not making a supply covered by subsection 38-45(1) of the GST Act.

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 any other provision in 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 makes modifications to a client's surgical shoes. Note: where the entity is supplying one of the services that are listed in the table in subsection 38-10(1) of the GST Act that is relevant to this type of service (such as podiatry), it is supplied by a recognised professional in relation to that listed service and the entity modifies a surgical shoe due to the changing shape or condition of the patient or the patient's foot, it is considered that this is generally accepted within that profession as being necessary for the appropriate treatment of the recipient of the supply (that is, the recipient of the supply is a patient rather than a third party), and the supply of such services will be GST-free.