Tribunal finds product GST-free as the supply of a medical aid or appliance

Today the Tribunal handed down its decision in Snugfit Australia Pty Ltd and Commissioner of Taxation [2013] AATA 802 where the Tribunal found that the supply of a product known as a “SnoreBeGone” sleep positioning system was GST-free under s 38-45(1) of the GST Act as a supply of a medical aid or appliance.

The Tribunal applied the “essential character” test, which was the test applied to the classification of goods under sales tax legislation. The Tribunal considered that the test was equally applicable to the GST Act. The principle was stated as follows:

…the task…is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.

The Tribunal agreed with the applicant’s contention that the product fell within the description “night time positioning equipment modifications” in Item 82 of Schedule 3. The Tribunal found that the product modified the shape of a mattress (being the night time positioning equipment) to accommodate the particular requirement of a person with a disability. As noted by the Tribunal:

A mattress is properly described as “night time positioning equipment” as it provides a surface which holds a person in a horizontal position, commonly for the purpose of sleeping at night. The essential purpose of the product is to modify that horizontal surface by changing its shape so that the person’s torso is held in an inclined position and the head is elevated from the mattress.

The Tribunal rejected the applicant’s alternate contentions that the product fell within the items described as “bed restraints”, “backrests, leg rests and footboards for bed use” and “cushions specifically designed for people with disabilities”. The Tribunal found that the essential character of the product was a device to position the body to prevent snoring.

I believe this is the first decision of a Tribunal or a Court dealing with s 38-45 and the classification of items in Schedule 3 listing items which are GST-free as the supply of medical aids and appliances. There have been decisions dealing with the items in Schedules 1 and 2 (food and beverages) – see for example JMB Beverages Pty Ltd v Commissioner of Taxation [2010] FCAFC 68.

The decision illustrates that the approach to the classification of products under the wholesale sales tax regime remains relevant in the context of the classification of products under the GST Act.

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