ATO Interpretative Decision
ATO ID 2002/254
Goods and Services Tax
GST and the supply of paracetamol products to pharmacies and supermarketsFOI status: may be released
Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a supplier of paracetamol products, 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 paracetamol products to pharmacies and supermarkets?
Decision
No, the entity is not making a GST-free supply under section 38-50 of the GST Act, when it supplies paracetamol products to pharmacies and supermarkets. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of paracetamol products. The entity supplies paracetamol products to pharmacies and supermarkets.
The paracetamol products are for human use or consumption.
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. Where this condition is satisfied, the supply must also satisfy the requirements contained in at least one of subsections 38-50(1), 38-50(2), 38-50(4), 38-50(4A), 38-50(5) or 38-50(6) of the GST Act.
Subsection 38-50(7) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free under this section 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.
In the present circumstances, the entity is supplying paracetamol products that are for human use or consumption. However, the supply is not made to an individual for their private or domestic use or consumption. The entity is supplying the paracetamol product to supermarkets and pharmacies. Therefore, the requirements of subsection 38-50(7) of the GST Act are not satisfied. Accordingly, the supply is not GST-free under section 38-50 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 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 paracetamol products to pharmacy and supermarkets.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
subsection 38-50(7)
section 195-1
Keywords
Goods & services tax
GST-free
GST health
Section 38-50 - drugs and medicinal preparations
ISSN: 1445-2782