ATO Interpretative Decision

ATO ID 2003/10

Goods and Services Tax

GST and goods supplied after conclusion of GST-free other health service
FOI status: may be released

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 health professional, making a GST-free supply under subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies goods to a client after the conclusion of a GST-free consultation?

Decision

No, the entity is not making a GST-free supply under subsection 38-10(3) of the GST Act when it supplies goods to a client after the conclusion of a GST-free consultation.

The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a health professional. The entity supplies a client with a health service that is GST-free under subsection 38-10(1) of the GST Act.

Because of this health service, the entity establishes that the client requires certain goods for their treatment. The entity does not have the goods in stock at the time of consultation. The entity orders the goods and supplies them to the client on a subsequent day after they have been delivered.

The supply of the goods occurs at the same premises at which the GST-free health service was supplied. The entity does not provide any health services to the client at the time of supplying the goods.

The goods are not GST-free medical aids or appliances under subsection 38-45(1) of the GST Act. The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist.

The goods are not 'Other GST-free health goods' under subsection 38-47(1) of the GST Act.

The goods are not GST-free drugs or medicinal preparations under section 38-50 of the GST Act.

The entity is registered for goods and services tax (GST) and the supply of the goods satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if:

•: it is made to a person in the course of supplying to that person a service the supply of which is GST-free under subsection 38-10(1) of the GST Act (other than a service of Naturopathy, Herbal Medicine, Optometry or Pharmacy); and
•: it is made at the premises at which the service is supplied.

The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist and has supplied its client with a GST-free health service under subsection 38-10(1) of the GST Act. The entity also supplies the goods from the same premises at which the GST-free health service was supplied. Therefore, it needs to be determined whether the entity is supplying the goods 'in the course of supplying' the GST-free health service.

For goods to be supplied 'in the course of supplying to the person a service', in the context of subsection 38-10(3) of the GST Act, the goods must be supplied at the same point in time at which the GST-free health service is supplied.

In addition, the goods have to be either:

a): customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free 'other health service'; or
b): necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation.

The entity does not have the goods in stock at the time of the GST-free consultation. The entity orders the goods and, after they have been delivered, supplies the goods to its patient. Therefore, the goods are not supplied at the same point in time as the GST-free consultation. In addition, when the entity finally does supply the goods to the client, it does not provide the client with any further health services. The entity is merely making a sale of goods.

As such, the entity is not making a GST-free supply of goods under subsection 38-10(3) of the GST Act as the entity is not supplying the goods to its client 'in the course of supplying' its GST-free health service.

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 supplies goods to a client after the conclusion of a GST-free consultation.

[Note 1: As the entity did not supply the goods at the same point in time as a GST-free health service, it is not necessary to consider whether the remaining requirements for supplying goods 'in the course of' the GST-free supply are met. That is, whether the goods are customised or manipulated for the exclusive treatment of the particular patient or necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation.

Note 2: Goods supplied by Naturopaths or Herbal medicine providers are GST-free where the requirements of subsection 38-10(4) or sections 38-45 or 38-47 of the GST Act are met.

Note 3: Goods supplied by a Pharmacist are GST-free if they meet the requirements of sections 38-45, 38-47 or 38-50 of the GST Act.

Note 4: Goods supplied by an Optometrist are GST-free if they meet the requirements of sections 38-45, 38-47 or 38-50 of the GST Act.]

Date of decision: 5 December 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 38
   subsection 38-10(1)
   subsection 38-10(3)
   subsection 38-10(4)
   section 38-45
   subsection 38-45(1)
   section 38-47
   subsection 38-47(1)
   section 38-50
   Division 40

Other References:
Health Industry Partnership - Issues Register - issue 2.b

Keywords
Goods & services tax
GST free
GST health
Section 38-10 - other health services
GST supplies & acquisition
Taxable supply

Siebel/TDMS Reference Number: 1252891

Business Line: Indirect Tax

Date of publication: 14 February 2003

ISSN: 1445-2782

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