Edited version of your written advice

Authorisation Number: 1012925869327

Date of advice: 9 December 2015

Ruling

Subject: GST and supply of cosmetic treatments to private individuals

Question

In the course of you supplying cosmetic treatment to a private individual, is the supply and injection of the prescribed drug by a registered dentist a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Advice

No. The supply and injection of the prescribed drug are two separately identifiable parts of your supply of the cosmetic treatment. The supply of the prescribed drug is GST-free under section 38-50 of the GST Act and the supply of medical service is a taxable supply under section 9-5 of the GST Act.

Relevant fact

You are an Australian entity and registered for the goods and services tax (GST).

You are expanding your dental practice to include cosmetic treatments by way of supply and injection of a prescribed drug at the same time to private individuals.

No Medicare benefit is payable for the cosmetic treatment.

The private individuals are charged a fee based on the amount of drug injected. No fee is charged for the service of injecting the drug.

A registered dentist is supplying and injecting the prescribed drug to the individuals. The individuals are receiving the prescribed drug for cosmetic reasons.

The dental professional accepts that injection of the prescribed drug to individuals is within the scope of a registered dentist.

The prescribed drug is specified in Schedule 4 of the Standard for the Uniform Scheduling of Drugs and Poisons (SUSDP).

The individuals cannot purchase the prescribed drug only.

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 38-10

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

Detailed reasoning

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

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

(a) you make the supply for consideration; and

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

(c) the supply is connected with the indirect tax zone (Australia), and

(d) 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 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.

GST-free supply

In the course of supplying cosmetic treatment, you supply a prescribed drug to individuals by way of injections that are carried out by a registered dental practitioner. Therefore, subsection 38-10(1), sections 38-7 and 38-50 of the GST Act are relevant for consideration.

Subsection 38-10(1) of the GST Act

Under subsection 38-10(1) of the GST Act, a supply is GST-free if:

a) it is a service of a kind specified in the table in the subsection, or a kind specified in the regulations; and

b) the supplier is a recognised profession in relation to the supply of services of that kind; and

c) the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

All requirements in subsection 38-10(1) of the GST Act must be satisfied for a supply of services made by a registered dentist to be GST-free.

Goods and Services Tax Class Ruling CR2013/14 provides guidance on goods and services supplied by dentists.

In regard to paragraph 13-10(1)(c) of the GST Act, paragraphs 43 and 45 of CR2013/14 state:

43. To be GST-free, the dental profession must accept that the service is necessary and acceptable treatment, taking into account the patient's individual circumstances.

45. Services which are predominantly for the improvement of the appearance of the patient are also not 'necessary for the appropriate treatment' of the patient and therefore, are not GST-free.

You advised that the registered dentist is supplying and injecting the prescribed drug only for cosmetic reasons. In this instance, the cosmetic procedure performed by the dentist is not for the appropriate treatment of the individual since the cosmetic procedure is mainly for the improvement of the appearance of the individual. The cosmetic procedure performed by the registered dentist is therefore not GST-free under subsection 38-10(1) of the GST Act.

Supply of medical services - injection of drug

Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free.

'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.

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

However, under paragraph 38-7(2)(b) of the GST Act, a supply of a medical service will not be GST-free if the following two elements are satisfied:

a) the medical service is rendered for cosmetic reasons, and

b) the service is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973.

You advised that the services that you provide in administering the prescribed 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 injections is not GST-free under section 38-7 of the GST Act.

Supply of prescribed drugs

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 dental practitioner. As the prescribed drug is listed in Schedule 4 of the SUSDP and supplied by a registered dental practitioner, your supply of the prescribed drug to an individual in the course of a cosmetic treatment satisfies paragraph 38-50(2)(a) of the GST Act.

For the supply of the prescribed 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.

The supply of the prescribed drug meets the above requirements as they are administered to a human and the supply is for the private use of the individual.

Accordingly, your supply of the prescribed drug to individuals is a GST-free supply under section 38-50 of the GST Act.

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 injection of the prescribed 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 prescribed drug.

Conclusion

When you supply cosmetic treatments to private individuals you are making a mixed supply of a medical service and supply of prescribed drug to the individuals. The supply of the prescribed 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.