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Ruling

Subject: GST and supply of vitamins and supplements by a naturopath

Question

Is the entity's supply of vitamins and supplements GST-free when it supplies them to its patients for consumption away from the premises at which the entity supplies GST-free naturopathy services?

Answer

No, the entity's supply of vitamins and supplements is not GST-free when it supplies them to its patients for consumption away from the premises at which the entity supplies GST-free naturopathy services. The supply is taxable under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

The entity is registered for the goods and services tax (GST).

The entity's supply of naturopathy services is GST-free as the requirements of subsection 38-10(1) of the GST Act which is the relevant provision are satisfied.

The entity supplies vitamins and supplements to its patients in the course of supplying the GST-free naturopathy services. Many of the vitamins and supplements it supplies are consumed away from the premises at which the entity supplies its services as it supplies them as part of a course of treatment.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 9-80

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(4)

Reasons for decision

Under subsection 7-1(1) of the GST Act, GST is payable on taxable supplies and taxable importations.

Section 9-40 of the GST Act provides that an entity must pay the GST payable on any taxable supply that it makes.

An entity makes a taxable supply under section 9-5 of the GST Act if:

· it is made for consideration

· it is made in the course or furtherance of an enterprise that that the entity carries on

· the supply is connected with Australia

· the entity is registered or required to be registered for GST, and

· the supply is not GST-free or input taxed.

Of relevance to the supply of vitamins and supplements, the issue in this case, is subsection 38-10(4) of the GST Act which provides that a supply of goods will be GST-free if:

· it is made to a person in the course of supplying to the person a service referred to in item 8 or 9 of the table in subsection 38-10(1), and

· it is supplied, and used or consumed at the premises at which the service is supplied.

Item 8 of the table in subsection 38-10(1) of the GST Act refers to 'Herbal medicine (including traditional Chinese herbal medicine' and item 9 refers to 'Naturopathy'.

The phrase 'in the course of supplying to the person a service' is interpreted to require that the goods are supplied at the same point in time at which the identified GST-free health service, which in this case is naturopathy, is supplied.

In addition, the goods will have to have been either:

· customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free health service, or

· necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation.

Subsection 38-10(4) of the GST Act also has an additional second element which is that the supply of goods 'is supplied, and used or consumed at the premises at which the service is supplied'. It is considered that 'used' in this context means 'completely used or exhausted' at the premises and 'consumed' in this context means 'completely consumed or ingested' at the premises. As such, if the goods are only partially used or consumed at the premises, it is considered that only that portion used or consumed at the premises will satisfy subsection 38-10(4) of the GST Act.

Therefore, the entity's supply of vitamins and supplements are only GST-free to the extent that they are used or consumed at the premises at which it supplies its GST-free naturopathy services. The supply of vitamins and supplements to patients for use or consumption away from the premises at which the entity supplies its GST-free naturopathy services are taxable under section 9-5 of the GST Act.

For your information

Where an entity makes a supply which is partly taxable and partly GST-free (a mixed supply), it will need to apportion the consideration charged for the supply between the GST-free and taxable parts pursuant to section 9-80 of the GST Act.

A reasonable basis for apportionment must be used and each case must be determined on its own facts. Records must be kept that explain the method of apportionment used. Goods and Services Tax Ruling GSTR 2001/8 which is available at www.ato.gov.au provides guidance on mixed supplies and apportionment.