Edited version of your written advice

Authorisation Number: 1012916599474

Date of advice: 25 November 2015

Ruling

Subject: GST and Supply of Prescription Medication for Cosmetic Procedures.

Question

Is the supply of prescription medication and the injection of prescription medication for cosmetic services a mixed supply for GST purposes?

Answer

Yes, the supply of prescription medication and the injection of the prescription medication for cosmetic procedures is a mixed supply for GST purposes.

Relevant facts and circumstances

• The entity is registered as a medical practitioner and used prescription medication for cosmetic medical procedures.

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

• The medical practice of the entity uses a toxin and dermal fillers.

• The above mentioned products are included in Schedule 4 of the 'Standard for the Uniform Scheduling of Drugs and Poisons' (SUSDP) and can only be supplied to medical practitioners.

• Under the supply process a patient purchases the above mentioned products from the medical practitioner. The patient is then injected with these products by the medical practitioner.

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

Reasons for decision

You must pay GST if you make a taxable supply. However, a supply is not taxable to the extent that it is GST-free or input taxed.

A supply may be characterised as consisting of one or more things or parts. 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.

In this case, as the supply of the toxin and the dermal filler consists of a process, it must be examined to determine the nature of the supply.

The GST treatment of a mixed supply is examined in Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8).

Paragraph 40 of GSTR 2001/8 states:

40. Overseas courts have considered a number of cases about whether a supply is mixed or composite. They have considered a supply as being mixed where its parts are separately recognisable or have an aim in themselves. On the other hand, they regard a supply as composite where it contains, or appears to contain, several parts that may objectively be treated as if they are simply a supply of a single thing. The terms they have used in describing subordinate parts of a composite supply include 'incidental', 'integral','ancillary'.

Paragraphs 43 and 44 of GSTR 2001/8 state:

43. A mixed supply contains separately identifiable parts where one or more of the parts is taxable and one or more of the parts is non-taxable. None of these parts is integral, ancillary or incidental in relation to the whole supply. On the other hand, a composite supply is a supply of one dominant part that has other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply.

44. In working out whether you are making a mixed or composite supply, the key question is whether the supply should be regarded as having more than one separately identifiable part, or whether it is essentially a supply of one dominant part with one or more integral, ancillary or incidental parts.

In this case, the supply consists of two parts, one part being the sale of the toxin and the dermal filler by you to the patient and the other part being the supply of a medical service (injection of these products) by you to the patient.

A supply of a drug or medicinal preparation will be GST-free where it first satisfies the requirements in subsection 38-50(7) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and also satisfies the requirements contained in at least one of subsections 38-50(1), 38-50(2), 38-50(4), 38-50(5) or 38-50(6) of the GST Act.

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

Paragraph 38-50(7)(a) of the GST Act is met in your case as the drug is administered to a human.

Paragraph 38-50(7)(b) of the GST Act is also satisfied in this case because the supply is made to an individual for private use or consumption (beauty treatment).

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 drug or medicinal preparation 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 each of the abovementioned products is listed in the Schedule 4 of the SUSDP, a supply of any of these products by you to a patient for private or domestic use or consumption is GST-free. As the supply by you to a patient in the course of a cosmetic medical procedure will satisfy the requirements of paragraph (a) above, subsection 38-50(2) of the GST Act will be satisfied.

The sale of toxin and dermal fillers by you to the patient is therefore a GST-free supply.

In order to determine whether the second part of the supply process (the injection of the dermal filler and any consultation occurs) is GST-free, we must consider the nature of the medical service being provided.

Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free. However, subsection 38-7(2) of the GST Act stipulates where a medical service is not GST-free.

Paragraph 38-7(2)(b) of the GST Act provides that a medical service is not GST-free if it is:

• rendered for cosmetic reasons; and

• it is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973

In this case the injection of the toxin and the dermal filler meets the requirements of paragraph 38-7(2)(b) of the GST Act. Therefore, the medical service component in the supply process is not a GST-free supply and you are making a mixed supply of medical service and of prescribed medication for cosmetic procedures.

The consideration received for a mixed supply must be apportioned between the taxable and non-taxable parts to determine the correct amount of GST payable.

Where there is no legislative provision specifying a basis for apportionment you may use any reasonable method to apportion the consideration to the parts of a mixed supply. However, the apportionment must be supportable by the facts in the particular circumstances. What is a reasonable method of apportioning the consideration for a mixed supply depends on the circumstances of each case.