1 Is your importation of the medical products a non-taxable importation under section 13-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
1 Yes. Question 2 Is your supply of medical products GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Answer 2 Yes. This ruling applies for the following period: XX XXX 20XX to X XXX 20XX
You are registered for goods and services tax (GST). You import and are the distributer of medical and wellness products in Australia. The products are medical devices that are designed to be applied to the body for the treatment of an illness or disability. The products are designed for individuals with temporary or permanent injuries. The products are not for general use by patients and it is recommended that the patient consult a physician before using the products.
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) A New Tax System (Goods and Services Tax) Act 1999 subsection 182-10(2) A New Tax System (Goods and Services Tax) Regulations 2019 ATO Interpretative Decision ATO ID 2001/273 ATO Interpretative Decision ATO ID 2001/363
Non-taxable importation Under sub-section 13-10 of the GST Act, an importation is a non-taxable importation if: (a) it is a non-taxable importation under Part 3-2; or (b) it would have been a supply that was GST-free or input taxed if it had been a supply. As the products do not fall under the goods covered by Part 3-2, we need to determine if the products meet the conditions of paragraph (b) and whether they are GST-free or input taxed. Medical aids and appliances Division 38 of the GST Act sets out those supplies that are GST-free. Relevantly, subsection 38-45(1) of the GST Act provides that a supply of a medical aid or appliance is GST-free if: (a) it is covered by Schedule 3 (medical aids and appliances), or specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations); and (b) the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability. With regards to the first requirement in paragraph 38-45(1)(a), the item must be covered by Schedule 3 or be specified in the GST Regulations.
The second column of the table in Schedule 3 is not operative and may only be considered for a purpose for which an explanatory section may be considered under subsection 182-10(2) of the GST Act. The medical aids or appliances covered by Schedule 3 are itemised in the third column of the table. In relation to the products in question, they would need to be considered against the following items: • Table including item number, category and medical aid or appliance information supplied. The products are not specified in the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). The determination further provides that although the category heading is not an operative part of Schedule 3, it does confirm that XX, for the purposes of Item XX, is restricted to devices which are designed to be used or applied for a medical purpose.
This interpretation is further addressed in XXX XXX XXX XXX XXX which provides that generally, where a term is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). Given the context in which the terms appears (i.e., in a list of medical aids and appliances), the terms used in the items are generally considered to have a special or technical meaning. There is a wide variety of prefabricated and custom-made medical aids made by qualified medical persons to meet the specific and unique needs of the individual. However, there are also many off-the-shelf products that are prefabricated, mass-manufactured and available in various designs, sizes and materials. The individual is able to, quickly and easily, obtain similar products but generally at a lower cost. The choice would be dictated by factors such as the specific condition and symptoms, lifestyle needs and budget considerations.
We consider that the fundamental application of each of the products is to work as a medical aid. Paragraph 38-45(1)(b) Paragraph (b) of section 38-45 (1) provides that the medical aid or appliance must be both 'specifically designed for people with an illness or disability' and 'is not widely used by people without an illness or disability'. In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased. Subsection 38-45(1) does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products. Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to its manufactured purpose will not prevent the good from being GST-free. Goods and Services Tax Determination Goods and services tax: adjustable beds, pressure management mattresses and pressure management overlay (GSTD 2021/2)
GSTD 2021/2 discusses the terms 'specifically designed and 'not widely used'. In considering whether a product is 'specifically designed' for people with an illness or disability, the ATO says it will consider factors such as: • whether an objective view of the design features and characteristics of the product indicates whether its essential character is that it is specifically designed for people with an illness or disability • the designer's or manufacturer's intention of how the particular product is to be used. This may involve an objective consideration of how the product is marketed and the type of outlets at which the product can be purchased
As the phrase 'not widely used' is not defined in the GST Act, it therefore takes its ordinary meaning, having regard to the context in which it appears. It is a question of degree whether a product is not widely used by people without an illness or disability. The Commissioner considers that it is reasonable to conclude that the test is not satisfied if the product is widely purchased by or on behalf of people without an illness or disability, without the need to examine how this class of people in fact use the product. In the context of paragraph 38-45(1)(b), the Commissioner considers 'not widely used' to mean not used by many people who do not have an illness or disability. The Commissioner considers the following factors to be relevant, but are not an exhaustive list, when considering whether a product is widely used by people without an illness or disability: • The product is widely sold in retail or other outlets that predominantly sell the standard product (that is, the same product that does not have features specifically designed for people with an illness or disability) to the general public.
• The marketing material for the product emphasises how it enhances the lifestyle of people without an illness or disability. Based on the information provided, the products are specifically designed for people with an illness or disability and they are not widely used by people without an illness or disability. In summary As the requirements under sub-section 38-45(1) of the GST Act are met, the supply of the products, as listed above, is GST-free. Therefore, the importation of those XX products will be a non-taxable importation under section 13-10 of the GST Act.