ATO Interpretative Decision

ATO ID 2004/483

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a pharmacy, making a GST-free supply under section 38-50 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies vitamins on prescription to an individual for private use?

Decision

No, the entity is not making a GST-free supply under section 38-50 of the GST Act when it supplies vitamins on prescription to an individual for private use. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a pharmacy. The entity supplies vitamins on prescription to an individual for private use. These vitamins are only for human use and consumption.

The supply of the vitamins is not restricted under a state or territory law in the state or territory in which the supply takes place.

The vitamins are not a pharmaceutical benefit within the meaning of Part VII of the National Health Act 1953 nor are they supplied as a pharmaceutical benefit within the meaning of section 91 of the Veterans' Entitlements Act 1986.

The vitamins are not analgesics nor are they drug or medicinal preparations of a kind declared by the Health Minister to be GST-free by determination.

The vitamins are not supplied under the Special Access Scheme.

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.

Reasons for Decision

Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. For a supply of a drug or medicinal preparation to be GST-free under section 38-50 of the GST Act, the supply must first satisfy the requirements in subsection 38-50(7) of the GST Act.

Subsection 38-50(7) of the GST Act provides that a supply of a medicinal preparation covered by section 38-50 of the GST Act is GST-free if, and only if:

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the drug or medicinal preparation is for human use or consumption, and

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the supply is to an individual for private or domestic use or consumption.

These vitamins are only for human use and consumption. The recipient of the supply is an individual who will use the vitamins for private or domestic use or consumption. Therefore, the supply of the vitamins on prescription meets the requirements of subsection 38-50(7) of the GST Act.

However, for the entity's supply to be GST-free, the supply of the vitamins on prescription must also satisfy at least one of the other subsections in section 38-50 of the GST Act.

Subsection 38-50(1) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if the drug or medicinal preparation is supplied on prescription and:

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the supply of the drug or medicinal preparation is restricted under a state or territory law in the state or territory in which the supply takes place, but it may be supplied on prescription, or

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the drug or medicinal preparation is a pharmaceutical benefit (within the meaning of Part VII of the National Health Act).

Although the vitamins are supplied on prescription, their supply is not restricted under a state or territory law in the state or territory in which the supply takes place. Accordingly, the vitamins can be legally supplied without a prescription. The vitamins are not a pharmaceutical benefit within the meaning of Part VII of the National Health Act. As such, the supply of the vitamins does not satisfy the requirements of subsection 38-50(1) of the GST Act.

Subsection 38-50(2) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if the supply to an individual for private or domestic use or consumption is restricted under a state or territory law in the state or territory in which it is supplied, but may be made by:

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a medical practitioner, dental practitioner, or pharmacist, or

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any other person permitted by or under that law to do so.

The supply of the vitamins is not restricted under a state or territory law in the state or territory in which the supply takes place. As such, the supply of the vitamins does not satisfy the requirements of subsection 38-50(2) of the GST Act.

Subsection 38-50(3) of the GST Act provides that subsection 38-50(2) of the GST Act does not cover the supply of a drug or medicinal preparation of a kind specified in the regulations. As the supply of the vitamins does not satisfy the requirements of subsection 38-50(2) of the GST Act, this provision does not apply.

Subsection 38-50(4) of the GST Act provides that a supply of a drug, medicine or other pharmaceutical item is GST-free if the supply is on prescription and:

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it is supplied as a pharmaceutical benefit (within the meaning of section 91 of the Veterans' Entitlements Act), and

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it is supplied under an approved scheme (within the meaning of that section)

The vitamins are not supplied as a pharmaceutical benefit under the Veterans' Entitlements Act. As such, the supply of the vitamins does not satisfy the requirements of subsection 38-50(4) of the GST Act.

Subsection 38-50(5) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if:

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the drug or medicinal preparation is an analgesic that has a single active ingredient

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its supply would be GST-free under subsection 38-50(2) of the GST Act if it were supplied in a larger quantity, and

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the drug or medicinal preparation is of a kind the supply of which is declared by the Health Minister to be GST-free by determination in writing.

The vitamins are not analgesics. Therefore, the supply of the vitamins does not satisfy the requirements of subsection 38-50(5) of the GST Act.

Subsection 38-50(6) of the GST Act provides that a supply of a medicinal preparation is GST-free if:

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the drug or medicinal preparation is the subject of an approval under paragraph 19(1)(a) of the Therapeutic Goods Act 1989, and any conditions to which the approval is subject have been complied with,

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the drug or medicinal preparation is supplied under an authority under subsection 19(5) of the Therapeutic Goods Act, and the supply is in accordance with any regulations made for the purposes of subsection 19(7) of the Therapeutic Goods Act, or

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the drug or medicinal preparation is exempted from the operation of Part 3 of that Act under regulation 12A of the Therapeutic Goods Regulations 1990.

This subsection applies to supplies of drugs and medicinal preparations that are supplied under the Special Access Scheme. The Special Access Scheme allows new drugs and medicinal preparations, which have not yet been approved for supply in Australia, to be supplied to patients who have life-threatening or other serious illnesses.

The vitamins are not supplied under the Special Access Scheme. As such, the supply of the vitamins does not satisfy the requirements of subsection 38-50(6) of the GST Act.

Although the entity's supply of vitamins on prescription satisfies subsection 38-50(7) of the GST Act, it does not satisfy any of the other subsections listed under section 38-50 of the GST Act. As such, the supply is not a GST-free supply of a drug or medicinal preparation.

The entity is registered for GST. 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 provisions of 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 vitamins on prescription, to an individual for private use.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   section 38-50
   subsection 38-50(1)
   subsection 38-50(2)
   subsection 38-50(3)
   subsection 38-50(4)
   subsection 38-50(5)
   subsection 38-50(6)
   subsection 38-50(7)
   Division 40

Other References:
The Standard for the Uniform Scheduling of Drugs and Poisons

Keywords
Goods and services tax
GST free
GST health
Section 38-50 - drugs & medicinal preparations
GST supplies & acquisitions
Taxable supply

Business Line:  GST

Date of publication:  11 June 2004

ISSN: 1445-2782