Edited version of private advice

Authorisation Number: 1051540027739

Date of advice: 04 July 2019

Ruling

Subject: GST and injectables

Question 1

Is your supply of injectables to its clients a GST-free supply under section 38-50 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes the supply of injectables is a GST-free supply.

Question 2

Is your supply of administering injectables to its clients a taxable supply under section 9-5 of the GST Act?

Answer

Yes, the supply of administering injectables is a taxable supply.

Question 3

As your supply is a mixed supply, are you required to apply an apportionment methodology, which is fair and reasonable in the circumstances, to determine the GST payable on the taxable component (i.e. the administering of the injectables)?

Answer

Yes, you will be required to apply a fair and reasonable methodology to determine the GST payable on the taxable component of a mixed supply.

This ruling applies:

On and from its date of issue

Relevant facts and circumstances

You are registered for GST.

Your clinics make supplies including Injectables.

In making the supply of the injectables, there is both the product component of the supply (being the injectable solution and medicine itself); as well as the service component of the supply (being the act or effort of administering the solution and medicine).

The injectables provided by you to your clients are listed as prescription-only medicines under Schedule 4 of the Standard of the Uniform Scheduling of Medicines and Poisons (SUSMP).

You have provided a list of injectables that you supply to your clients.

Your clients receive the injectables for relevant reasons rather than for medical, reconstructive or therapeutic reasons. The clients are all un-registered, private individuals.

You strictly follow legal and medical guidelines in relation to its supply of injectables.

In accordance with accepted practice, you provide injectable consultations at all clinics. There is a doctor available (usually online) to perform initial consultations and 12 monthly reviews, approving the prescription medicine and to sign the Schedule 4 (SUSMP) prescription.

Following initial consultation or 12-month review, a qualified injector (either a nurse or doctor being a person permitted by law) can administer the injectable.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-30

A New Tax System (Goods and Services Tax) Act 1999 section 38-50

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Under section 9-5 of the GST Act a supply will be a taxable supply where all of the following requirements are met:

a)    the supply is made for consideration

b)    the supply is made in the course or furtherance of an enterprise that the supplier carries on

c)    the supply is connected with the indirect tax zone and

d)    the supplier is registered or required to be registered.

However the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The supplies made by you will be taxable supplies unless there is another provision in the GST Act that makes those supplies GST-free or input taxed. There are no provisions in the GST Act that would make these supplies input taxed. The relevant GST provisions under which supplies could be GST-free are considered further in the detailed reasoning of Question 1 and Question 2.

Question 1

Is your supply of injectables to your clients a GST-free supply under section 38-50 of GST Act?

Detailed reasoning

Section 38-50 of the GST Act outlines when a supply of drug or medicinal preparations is GST-free. Of relevance to the supply of injectables is subsection 38-50(1) which states that a supply of a drug or medicinal preparations is GST-free if the supply is on prescription and:

(a)  under a State law or a Territory law in the State or Territory in which the supply takes place, supply of the drug or medicinal preparation is restricted, but may be supplied on prescription; or

(b)  the drug or medicinal preparation is a pharmaceutical benefit (within the meaning of Part VII of the National Health Act 1953)

However a supply of a drug or medicinal preparation can only be GST-free under section 38-50, if the drug or medicinal preparation is for human use or consumption and the supply is to an individual for private or domestic use or consumption (subsection 38-50(7) of the GST Act).

The drug or medicinal preparations you provide are for human use or consumption and the supplies are made to individuals for private or domestic use or consumption. As a result requirements of subsection 38-50(7) of the GST Act are satisfied.

From the facts provided, all of the injectables are listed as prescription only medicines under Schedule 4 of the Standard for the Uniform Scheduling of Medicines or Poisons (SUSMP).

The SUSMP also known as Poisons Standard is a legislative instrument that consists of decisions regarding the classification of medicines and poisons into Schedules which are generally adopted for inclusion in the relevant legislation of the States and Territories. Schedule 4 of the SUSMP lists prescription only medicines.

This means that the supplies of the injectables are restricted under a State law or a Territory law in the State or Territory in which the supply takes place as prescription only medicines. As a result the requirement of section 38-50(1) is met.

Your supplies of the injectables listed in the facts are GST-free supplies as the requirements of both subsection 38-50(1) and 38-50(7) are met.

Question 2

Is your supply of administering injectables to your clients a taxable supply under section 9-5 of the GST Act?

Detailed reasoning

The supply of administering injectables will be a taxable supply under section 9-5 of the GST Act unless the supply is GST-free. Section 38-7(1) provides that a supply of medical service is GST-free. However under subsection 38-7(2), supply of a medical service is not GST-free under subsection (1) if:

-  it is a supply of a ^*professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 (other than the prescribed circumstances set out in regulations 14(2)(ea), (f) and (g)); or

-  it is rendered for relevant reasons and is not a ^*professional service for which medicare benefit is payable under Part II of the Health Insurance Act 1973.

Medical service is defined in section 195-1 of the GST Act as:

-  a service for which a Medicare benefit is payable; or

-  any other service supplied by or on behalf of a medical practitioner or approved pathology practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

The administration of injectables by you does not qualify for a Medicare benefit. However, administration of injectables is a service that is supplied by or on behalf of a medical practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

In your circumstances the initial consultation and the 12-month review is performed by a medical practitioner (doctor) and the administration of the injectable is performed either by a qualified injector (nurse or a doctor being a person permitted by law). When a qualified nurse is performing the administration of injectables the nurse would be doing so on behalf of the medical practitioner.

As a result, administration of injectables satisfies the second limb of the definition of 'medical service' in section 195-1 of the GST Act as it is provided by or on behalf of the medical practitioner and is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

However, subsection 38-7(2)(b) states that a medical service will not be GST-free if the service is rendered for relevant reasons and is not a professional service for which medicare benefit is payable. Administration of injectables is a service for which no medicare benefit is payable and it is also a service that is rendered for relevant reasons.

As a result, the supply of administration of injectables is not GST-free but is a taxable supply under section 9-5 of the GST Act.

Question 3

As your supply is a mixed supply, are you required to apply an apportionment methodology, which is fair and reasonable in the circumstances, to determine the GST payable on the taxable component (i.e. the administering of the injectables)?

Detailed reasoning

As you are making a supply that is partly taxable (administering of injectables) and partly GST-free (injectables), you will need to apportion, on a reasonable basis, the fee received for the injectables between the taxable and non-taxable parts of the supply.

Section 9-80 of the GST Act is about supplies which are partly taxable and partly GST-free and describes how to calculate the value of the part of the supply that is a taxable supply.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on how to apportion consideration for a supply that includes taxable and non-taxable parts.

Paragraphs 92 to 96 of GSTR 2001/8 state:

92. Where, as in the case of supplies covered by section 9-75, there is no legislative provision specifying a basis for apportionment, you may use any reasonable method to apportion consideration to the separately identifiable taxable part of a mixed supply. However, the apportionment must be supportable by the facts in the particular circumstances and be undertaken as a matter of practical commonsense.

93. What is a reasonable method of apportioning the consideration for a mixed supply depends on the circumstances of each case. In some cases, there will be only one reasonable method you may use.

94. Depending on your circumstances, you may use a direct or indirect method when apportioning the consideration for a mixed supply.

95. The method you choose should be based on a consideration of all the circumstances and not because it gives you a particular result. You may need to use different methods, or a combination of methods, for different supplies to ensure the appropriate amount of GST is payable. You need to keep records that explain all transactions and other acts you engage in that are relevant to supplies you make, including supplies that are GST-free and input taxed.

96. Where consideration is apportioned in a manner that cannot be justified in terms of reasonableness, the general anti-avoidance provisions of the GST Act may have application

In the circumstances however, it would be considered unreasonable to conclude that all of the consideration received for the injectables treatment relates to the GST-free supply of injectables (product) and that no part of consideration is apportioned to the taxable service of administration of injectables. Example 13B of GSTR 2001/8 (paragraph 81ZI) illustrates unreasonable apportionment where a supply is a mixed supply of a drug and administration of a drug:

Example 13B of GSTR 2001/8 was provided.

Therefore, to determine the value of the taxable part of the supply, you can use any method of apportionment as long as that method is fair and reasonable. In line with Example 13B of GSTR 2001/8, the service of administering the injectable by a medical practitioner, or nurse, on behalf of a medical practitioner, is an important part of the treatment and has considerable value because of the level of professional skill and time involved. The method of apportionment relied on will need to reflect this in order for it to be considered fair and reasonable.

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