Edited version of private advice

Authorisation Number: 1052049192285

Date of advice: 28 October 2022

Ruling

Subject: Goods and services tax - health

Question

Are the sales of the following three types of products, that are not prescribed nor restricted drugs, to individuals in the general public GST-free supplies under section 38-50 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

[redated]

Answer

The sales of the above three types of products are not GST-free, as they do not meet the requirements under section 38-50 of the GST Act. As the supplies are not GST-free and they meet all the requirements of section 9-5 of the GST Act, the products are taxable.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 October 20XX

Relevant facts and circumstances

You are a trust. You are currently registered for goods and services tax (GST).

You developed a product to help relieve [redated] and have approvals from the [redated] to sell them.

You provided that a manufacturer produces the product, and you received the final product. The manufacturer charges GST as they do not sell to the public and to you only.

You provided that the products are not restricted drugs. The medicines are all made from approved ingredients, and no prescription is required for distribution.

The products will initially be available online only directly to the individual consumers for purchase.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Section 9-5

Section 38-50

Reasons for decision

Goods and services tax (GST) is payable on taxable supplies.

Under section 9-5 of the GST Act, you make a taxable supply if:

(a)  You make a supply for consideration; and

(b)  The supply is made in the course or furtherance 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.

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

There are no provisions in the GST Act under which your sales of the products are input taxed.

We considered whether your sales of the products are GST-free under section 38-50 of the GST Act.

GST-free supplies of drugs and medicinal preparations

A sale of drugs and medicinal preparations may be GST-free under section 38-50 of the GST Act where the sale is provided on prescription, or the supply of the medication is restricted. A sale of a medication may also be GST-free under certain other circumstances if they meet the requirements under section 38-50 of the GST Act.

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 a Territory law in the State or Territory in which the supply takes place, 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).

GST Pharmaceutical Health Forum - issues register Issue 3. Section 38-50 Drugs and medicinal preparations (issues register), which is a public ruling and provides the Commissioner's view, states that paragraph 38-50(1)(a) covers drugs and medicines labelled as 'Prescription Medicine' and 'Controlled Drugs' and paragraph 38-50(1)(b) covers Pharmaceutical Benefits Scheme (PBS) drugs and medicines supplied on prescription as a pharmaceutical benefit within the meaning of Part VII of the National Health Act. Therefore, the three products are not GST-free under subsection 38-50(1) of the GST Act.

Subsection 38-50(2) of the GST Act states:

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.

The issues register provides the Commissioner's view that subsection 38-50(2) of the GST Act covers drugs and medicine that can only be supplied by a medical practitioner, dental practitioner or pharmacist and it is compulsory to label these products as 'Pharmacy Medicine' and 'Pharmacy Only Medicine'. Therefore, the three products are not GST-free under subsection 38-50(2) of the GST Act.

Subsection 38-50(3) of the GST Act states:

Subsection (2) does not cover the supply of a drug or medicinal preparation of a kind specified in the regulations.

There have been no regulations released, to date, for the purposes of subsection 38-50(3) of the GST Act.

There is no evidence that the products fall under subsections 38-50(4), (4A), (5) and (6) of the GST Act.

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 requirements under subsection 38-50(7) of the GST Act are not considered in isolation when determining whether the supplies of drugs and medicinal preparations are GST-free. For the supplies of drugs and medicinal preparations to be GST-free, it must meet one of the requirements under subsection 38-50(1) to (6) of the GST Act and subsection 38-50(7) of the GST Act.

The products do not meet the requirements of subsections 38-50(1) and 38-50(2) of the GST Act as they are not prescription medicine nor restricted. Even though you may satisfy the requirement under subsection 38-50(7) of the GST Act that you are selling your products to individuals for private or domestic use or consumption, you do not satisfy any of the requirements under subsections 38-50(1) to (6) of the GST Act, therefore they are not GST-free.

Furthermore, all the requirements of section 9-5 of the GST Act will be satisfied and the sales of the products will be taxable supplies and are subjected to GST.