Edited version of your written advice

Authorisation Number: 1012898744206

Date of advice: 22 October 2015

Ruling

Subject: GST and supply of cosmetic treatment

Question

What is the goods and services tax (GST) status of the supply of a cosmetic treatment to a private individual?

Answer

The supply of the cosmetic treatment is a mixed supply that has two separately identifiable parts. The supply of the medical service is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and the supply of the drug or medicinal preparation (drug) is GST-free under section 38-50 of the GST Act.

Relevant facts and circumstances

You supply cosmetic treatment to private individuals that involve the supply and administration of a specified drug at the same time. The drug is administered for purely cosmetic reasons.

The drug supplied during the treatment is a prescription drug. The drug is a 'S4' medication that is, a drug specified in Schedule 4 of the 'Standard for the uniform Scheduling of Drugs and Poisons' (SUSDP).

You operate under an arrangement where a medical practitioner provides consultation to the private individuals for the cosmetic treatments and administers the drug. The consultation is considered to be an essential part of the treatment and it is a free consultation with no obligation to proceed with the treatment

The private individuals select the treatment they would like to have and are charged a specific single fee for the selected treatment. The fee for the cosmetic treatment is calculated on the amount of drug that is administered. No fee is charged for the injection of the drug. A Medicare benefit is not payable for this cosmetic treatment.

The individuals cannot purchase the drug only. The drug can only be supplied by medical practitioners.

You are registered for GST.

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 38-7.

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

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

You are liable for GST on any taxable supply that you make.

A supply is a taxable supply under section 9-5 of GST Act if:

(a) you make the supply for consideration

(b) the supply is made in the course of an enterprise that you carry on

(a) the supply is connected with Australia, and

(b) you are registered or required to be registered for GST.

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

Your supply of a cosmetic treatment meets the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. This is because the cosmetic treatment is supplied for consideration, in the course of carrying on your enterprise, the supply is connected with Australia and you are registered for GST.

The supply of the cosmetic treatment is not an input tax supply. Accordingly, what is left to consider is whether the supply, or any part of the supply, is GST-free.

Supply of medical services - administration of the drug

Section 38-7 of the GST Act state:

(1) A supply of a *medical service is GST-free.

(2) However, a supply of a *medical service is not GST-free under subsection (1) if:

(a) 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

(b) it is rendered for cosmetic reasons and is not a *professional service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973.

(* denotes a defined term in section 195-1 of the GST Act)

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

(a) a service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973; or

(b) 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.

You advised that the services that you provide in administering the drug are on a purely cosmetic basis and a Medicare benefit is not payable for the cosmetic treatment. In this instance, the medical service that you provide in administering the drug is not GST-free under section 38-7 of the GST Act.

Supply of drugs and medicinal preparations

Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation will be GST-free.

Subsection 38-50(2) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if, under a State law or a Territory law in the State or Territory in which it is supplied, the supply of the product to an individual for private or domestic use or consumption is restricted, but may be made by:

(a) a medical practitioner, dental practitioner, or pharmacist, or

(b) any other person permitted by or under that law to do so.

An item listed in Schedule 4 of the SUSDP (restricted drug) is covered by this subsection if supplied by a medical practitioner. As the drug is listed in Schedule 4 of the SUSDP and supplied by a medical practitioner, your supply of the drug to an individual in the course of a cosmetic treatment therefore satisfies paragraph 38-50(2)(a) of the GST Act.

For the supply of the drug to be GST-free, subsection 38-50(7) of the GST Act must also be satisfied. Subsection 38-50(7) of the GST Act provides that a supply of a drug or medicinal preparation covered by section 38-50 of the GST Act is GST-free if, and only if:

(a) the drug or medicinal preparation is for human use or consumption, and

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

From the information received, the supply of the drug meets the above requirements. Accordingly, your supply of the drug to individuals is a GST-free supply.

Mixed supply

Goods and Services Tax Ruling GSTR 2001/8 explains how you can identify whether a supply includes taxable and non-taxable parts under the GST Act.

As stated in paragraph 13 of GSTR 2001/8, a supply that may at first appear to be one thing may contain taxable and non-taxable parts on closer analysis. GSTR 2001/8 refers to such a supply as a 'mixed supply'. A 'mixed supply' is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised.

At paragraph 45, GSTR 2001/8 states that in many circumstances, it will be a matter of fact and degree whether the parts of a supply are separately identifiable, and retain their own identity.

Example 13B in Goods and Services Tax Ruling GSTR 2001/8 states:

Example 13B - unreasonable apportionment

81ZI. Felicity is a registered medical practitioner who provides cosmetic medical procedures using certain drugs. She provides a cosmetic procedure using a drug that is GST-free but the supply of the medical service is taxable. The procedure usually takes between 15 and 30 minutes to carry out. Felicity invoices the patient but only applies consideration to the GST-free supply of the drug. The medical service is not considered to be incidental to the supply of the drug because it is an important part of the cosmetic procedure and it has considerable value because of the level of professional skill and time involved. The supply by Felicity is a mixed supply and the consideration is in respect of both parts. It is unreasonable in these circumstances that no consideration relates to the medical service. There is no commercial reason for Felicity to not apply any of the consideration to the taxable medical supply.

Similarly in your case, the service of the administering the drug is an important part of the overall cosmetic treatment and it has considerable value because of the level of professional skill and time involved. In this instance, it is unreasonable to state that no consideration relates to the supply of the medical service when the cosmetic treatment is carried out. Accordingly, the total consideration received for the cosmetic treatment is in respect of both the supply of the medical service and the supply of the drug.

Conclusion

When you supply cosmetic treatments to private individuals you are making a mixed supply of a medical service and the drug to the individuals. The supply of the drug is GST-free under section 38-50 of the GST Act. The supply of the medical service is a taxable supply as it meets all the requirements of section 9-5 of the GST Act.