GST issues registers
Pharmaceutical health forum
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Issue 4. General questions
| Date | Issue |
|---|---|
| 26/02/01 | 4.a. Are goods supplied free to retailers as incentive stock, subject to GST? For example, if a Pharmaceutical Distributor runs a promotional campaign in which 20 'bonus' products are given to Pharmacists who achieve their monthly sales targets |
| 26/02/01 | 4.b. Under the rules of statutory interpretation, where two specific sections made a supply GST-free, which section applies? |
| 26/02/01 06/06/2013(u) | 4.c. The Therapeutic Goods Regulations 1990 require that packs which contain a 'Pharmacy only' scheduled medicine and an unscheduled medicine be packaged and labelled as a 'Pharmacy only' medicine. Will supplies of the pack be GST-free? |
| 29/07/05 06/06/2013(u) | 4.d. Are payments under the Medicines Information to Consumers program, Home Medicines Review program, Quality Care Pharmacy Program, and payments of Rural Pharmacy Maintenance Allowance consideration for a taxable supply? |
(a) added, (u) updated, (w) withdrawn
4.a. Are goods supplied free to retailers as incentive stock, subject to GST? For example, if a pharmaceutical distributor runs a promotional campaign in which 20 'bonus' products are given to Pharmacists who achieve their monthly sales targets.
Non-interpretative - straight application of the law.
Subsection 9-10(2) provides that a supply includes an entry into, or release from, an obligation to:
- •
- do anything, or
- •
- refrain from an act, or
- •
- tolerate an act or situation.
It is considered that where a Pharmaceutical Distributor runs a promotional campaign in which 20 'bonus' products are given to a Pharmacist for achieving their monthly sales targets, the 20 products represent consideration for a supply made by the Pharmacist to the Pharmaceutical Distributor for entering into an obligation to promptly turnover stock.
That is, the 20 'bonus' products are supplied on condition and in consideration for the Pharmacist entering into an obligation to promptly turnover stock and will be subject to GST.
It is important to note that in determining whether GST applies to goods supplied as incentive stock, each case is determined on its merits.
4.b. Under the rules of statutory interpretation, where two specific sections made a supply GST-free, which section applies?
Non-interpretative - straight application of the law.
The rules of statutory interpretation provide that where two sections of an Act have the propensity to apply to a factual situation, the section which is more specific in its terms to the particular circumstance, will be the applicable section.
For example within the GST Act, both subsection 38-45(1) and subsection 38-50(2) could be applicable to the supply of suppositories. Scheduled suppositories (refer to the discussion in question 3.g. on 'scheduled' medicines) could be GST-free where the requirements of subsection 38-50(2) are met. However, 'enemas, suppositories and applicators' are specifically itemised at item 25 of Schedule 3 to subsection 38-45(1). Therefore under the rules of statutory interpretation, suppositories will be GST-free under subsection 38-45(1) where the other requirements of that section are met, rather than subsection 38-50(2) and the practical outcome is that that class of suppositories will be GST-free at all points in the supply chain.
4.c. State and Territory legislation may require that packs which contain a 'Pharmacy only' scheduled medicine and an unscheduled medicine be packaged and labelled as a 'Pharmacy only' medicine. Will supplies of the pack be GST-free?
Non-interpretative - straight application of the law.
Subsection 38-50(2) provides that supplies of drugs and medicinal preparations are GST-free if, under the State or Territory law applicable to where the supply is made, the supply of that drug or medicinal preparation to an individual for private or domestic use or consumption is restricted. (Refer to issue 3.g. for a discussion on restricted medicines)
Where it is a requirement of State or Territory legislation that packs, containing one or more scheduled medicines and one or more unscheduled medicines, be classified and sold as a single medicine in the same schedule as the highest scheduled medicine in the pack, the supply of the entire pack will be GST-free.
4.d. Are payments under the Medicines Information to Consumers program, Home Medicines Review program, Quality Care Pharmacy Program and payments of Rural Pharmacy Maintenance Allowance consideration for a taxable supply?
For source of ATO view, refer to GSTR 2012/2 - Goods and services tax: financial assistance payments.
No, pursuant to GSTR 2012/2, payments under the Medicines Information to Consumers program, Home Medicines Review program, Quality Care Pharmacy Program and payments of Rural Pharmacy Maintenance Allowance are not consideration for supplies, and therefore cannot be consideration for taxable supplies.
Payments under these programs are made by the Health Insurance Commission (Medicare Australia from 1 October 2005).
Applicants for these payments do not enter into binding obligations with the payer to do anything for which the payment is consideration.
Applicants for these payments lodge an application for payment of an entitlement. While the information contained in the application for payment may meet the statutory definition of a 'supply', the information contained in the application is not the purpose for which the payment is paid. For GST purposes the payment is therefore not consideration for the information contained on the application.
Submitting the application, together with the information required to consider it, is merely a mechanism to establish whether a payment will be made.
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