Edited version of your private ruling

Authorisation Number: 1012571567729

Ruling

Subject: Goods and services tax (GST) and drugs and medicinal preparations

Question 1

Is the supply of a medicinal preparation to individual patients GST-free under section 38-50 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The supply of a medicinal preparation to individual patients is GST-free under section 38-50 of the GST Act when supplied on prescription and the supply is:

(a) for human use or consumption, and

(b) to an individual for private or domestic use or consumption.

Question 2

Is the supply of a medicinal preparation to doctors a taxable supply under section 9-5 of the GST Act?

Answer

Yes. The supply of a medicinal preparation to doctors is a taxable supply under section 9-5 of the GST Act.

Relevant facts and circumstances

· You are registered for GST.

· You supply a medicinal preparation.

· The medicinal preparation is supplied according to the prescription provided by a medical practitioner.

· The medicinal preparation is supplied only on prescription directly to patients and also to doctors who then sell the medicinal preparation to patients.

· The Commonwealth Department of Health and Ageing's Poisons Standard 2012 and Poisons Standard 2013 list drugs or medicinal preparations for human therapeutic use.

· Your medicinal preparation is included in Schedule 4 of both Poisons Standard 2012 and Poisons Standard 2013.

· The Poisons Standards consist of the Standard for the Uniform Scheduling of Medicines and Poisons (SUSMP), which was previously known as the Standard for the Uniform Scheduling of Drugs and Poisons (SUSDP).

· You have supplied documentation to show that your drug or medicinal preparation use is listed in Schedule 4 of Poisons Standard 2012.

· The Commonwealth Department of Health and Ageing's public website confirms that this class of drug or medicinal preparation is listed in Schedule 4 of both the Poisons Standard 2012 and the Poisons Standard 2013.

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 38-50.

Reasons for decision

Question 1

Section 9-5 of the GST Act provides that you make a taxable supply if:

· you make a supply for consideration

· the supply is and in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered or required to be registered for GST.

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

Section 38-50 of the GST Act covers the circumstances in which the supply of drugs and medicinal preparations is GST-free.

Subsection 38-50(7) of the GST Act provides that a supply of a drug or a medicinal preparation is GST-free under this section if, and only 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.

Where the requirements of subsection 38-50(7) of the GST Act are satisfied, the supply must also satisfy the requirements in at least one of subsections, 38-50(1), 38-50(2), 38-50(3), 38-50(4), 38-50(4A), 38-50(5), or 38-50(6) of the GST Act.

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

(a) under a state or territory law in the state or territory where the supply takes place, the 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).

Paragraph (a) of subsection 38-50(1) of the GST Act covers drugs and medicines specified in schedule 4 of the SUSDP or SUSMP that are only available on prescription.

Both Poisons Standard 2012 and Poisons Standard 2013 list certain types of drugs or medicinal preparations for human therapeutic use in Schedule 4 of the SUSMP. Your product is one of the types of drugs or medicinal preparations listed in Schedule 4 of the SUSMP.

When you supply your medicinal preparation to individual patients you are supplying them with a drug or medicinal preparation for human use or consumption for their own private or domestic use or consumption. Thus the requirements of subsection 38-50(7) of the GST Act are met. Further, the supply of the medicinal preparation to individual patients meets the requirements of subsection 38-50(1) of the GST Act, as it is supplied on prescription under a state or territory law where the supply takes place.

Thus the supply of the medicinal preparation to individual patients is GST-free under section 38-50 of the GST Act when supplied on prescription.

Question 2

As discussed above, you make a taxable supply when the four requirements of section 9-5 of the GST Act are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

When you supply the medicinal preparation that is for human use or consumption, to doctors, you are not making a supply to those doctors for their own private or domestic use or consumption. Rather, the supplies are made to doctors for resupply by the doctors to their patients in the course of the treatment of their patients.

Thus the requirements of subsection 38-50(7) of the GST Act are not met. As a consequence, when you supply the medicinal preparation to doctors, you are not making GST-free supplies. Rather, your supplies of the medicinal preparation to doctors are taxable supplies because all four of the requirements of section 9-5 of the GST Act are met, and the supply is not GST-free. Further, there are no provisions within Division 40 of the GST Act which would make such a supply input taxed.