Edited version of private advice

Authorisation Number: 1051807512151

Date of advice: 19 February 2021

Ruling

Subject: Goods and services tax and importation of medicines

Question 1

Was your importation of the following medicines correctly classified as a taxable importation, for GST purposes?

• Medicine 1
• Medicine 2

Answer

No. The importation of these medicines should have been classified as a non-taxable importation. The importation is GST-free.

Question 2

Was your importation of Medicine 3 correctly classified as a taxable importation, for GST purposes?

Answer

No. The importation of medicine 3 should have been classified as non-taxable, for GST purposes. The importation is GST-free.

Relevant facts and circumstances

You are from a foreign country.

You entered Australia on a certain date on a temporary visa.

Your disease requires that you take on a daily basis medicine 1, medicine 2 and medicine 3.

The cost of medicine 1 and medicine 2 is quite low and would be less than (amount) for a (number) month supply.

Medicine 3 is however massively expensive. The retail cost per tablet varies depending upon location but prices in the vicinity of (amount) per tablet appear to apply. You take (number) mg tablets per day or (amount) per day.

Before you left the foreign country, your doctor issued the script for the medicines, and arranged for a (number) month supply of the medicines.

(Number) months worth of drugs were supplied to you by special script by the foreign government to provide ongoing treatment of your disease. The drugs were supplied to you at no cost to you.

You have been forced to stay in Australia due to the second wave of COVID19 now sweeping through the overseas continent which poses a serious and possibly life threatening danger to your health.

You imported the medicines into Australia.

The medicines were sent to your relative who lives in the foreign country who then sent them to Australia on (date) via (courier company) post.

The declared value of the goods was over AUD $1,000.

It was necessary to send the medicines to the most secure address. Consequently, the medicines were sent to X who lives in Australia. X is related to your spouse. X is retired so they would normally be home waiting so that you can receive the medicines.

On (date), X received a text stating that duties of (amount) had to be paid to release the medicines for delivery.

The invoice from (courier company) includes a charge of (amount) for GST.

X paid the (amount).

Medicines listed on the PBS are pharmaceutical benefits within the meaning of Part VII of the National Health Act 1953.

Medicine 1 and medicine 2 are listed on the PBS and when supplied within Australia can only be supplied on prescription.

Medicine is not listed on the Therapeutic Goods Register. It is not an approved therapeutic good. It is not available in Australia.

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 13-5

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

A New Tax System (Goods and Services Tax) Act 1999 Division 42

Reasons for decisions

Questions 1 and 2

Summary

The importation of the three medicines is not a taxable importation, for GST purposes because:

• a hypothetical supply of each of the medicines in Australia to you would have been GST-free; and
• these medicines were supplied for human consumption and the supplies of these medicines were to an individual for private or domestic use or consumption.

Detailed reasoning

GST is payable on taxable importations.

You make a taxable importation where you meet the requirements of section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable importation if:

(a)  goods are imported; and

(b)  you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is a not a taxable importation to the extent that it is a*non-taxable importation.

In your case, you imported goods - the three medicines.

We consider that X completed the customs formalities and paid the assessed GST as agent on your behalf. Therefore, under the principle of agency, you are considered to have entered the goods for home consumption.

Section 13-10 of the GST Act states:

An importation is a non-taxable importation if:

(a)  it is a non-taxable importation under Part 3-2; or

(b)  it would have been a supply that was *GST-free or *input taxed if it had been a supply.

In Part 3-2 of the GST Act, subsection 42-5(1) states:

An importation of goods is a non-taxable importation if the goods are covered by item 4, 10, 11, 15, 18, 21, 21A, 23, 24, 25, 26 or 27 in Schedule 4 to the Customs Tariff Act 1995.

Paragraph 251 of GSTR 2003/15 states:

251. In determining whether an importation, if it had been a supply, would have been GST-free or input taxed, the Commissioner considers that you need to hypothesise that the importation were a supply to the importer. If this hypothetical supply to the importer would have satisfied one of the exemptions in Chapter 3 of the Act, the importation is non-taxable.

Goods that are imported and would have been treated as GST-free if they had been supplied within Australia are non-taxable importations.

Supplies of medicine may be GST-free under one of a number of provisions of the GST Act dealing with supplies of medicines.

Subsection 38-50(1) of the GST Act states:

A supply of a drug or medicinal preparation is GST-free if the supply is on prescription and:

(a)  under a *State law or *Territory law in the State or Territory in which the supply takes place, supply of the drug or medical 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).

Subsection 38-50(7) of the GST Act states:

A supply of a drug or medicinal preparation covered by this section 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.

Medicine 1 and medicine 2 can only be supplied in Australian on prescription. These medicines are listed on the PBS. Therefore, it you had been supplied with these medicines in Australia, they would have been supplied to you on prescription and they would have been supplies of pharmaceutical benefits. Additionally, these medicines were supplied for human use or consumption and the supplies of these medicines were to an individual for private or domestic use or consumption. Therefore, if these medicines were supplied to you in Australia, they would have been GST-free supplies. Hence, your importation of these medicines was a non-taxable importation.

Special Access Scheme

Subsection 38-50(6) of the GST Act states:

A supply of a drug or medicinal preparation is GST-free if:

(a)  the drug or medicinal preparation is the subject of an approval under paragraph 19(1)(a) of the Therapeutic Goods Act 1989, and any conditions to which the approval is subject have been complied with; or

(b)  the drug or medicinal preparation is supplied under an authority under subsection 19(5) of that Act, and the supply is in accordance with any regulations made for the purposes of subsection19(7) of that Act; or

(c)   the drug or medicinal preparation is exempted from the operation of Part 3 of that Act under regulation 12A of the Therapeutic Goods Regulations.

Subsection 38-50(6) of the GST Act relates to drugs and medicines supplied by Australian health practitioners to patients in Australia under the Special Access Scheme (SAS). Under the SAS, Australian health practitioners may be authorised to supply unapproved drugs not available in Australia to patients.

Medicine 3 is not an approved therapeutic good in Australia. It is not on the Therapeutic Goods Register. It is not available in Australia. Therefore, if you had been supplied with medicine 3 in Australia, it would have to have been supplied to you by an Australian health practitioner under the SAS.

Additionally, medicine 3 was supplied for human use and consumption and the supply was to an individual for their private use or consumption. Hence, if medicine 3 had been supplied to you in Australia, it would have been a GST-free supply. Therefore, your importation of medicine 3 is a non-taxable importation.

Advising on whether a particular Customs Duty concession applies to an importation is outside of the jurisdiction of the Australian Taxation Office (ATO). The ATO does not administer Customs Duty.

Please seek advice from Australian Border Force (ABF) or a customs broker on how to obtain a GST refund from ABF.