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Is the entity, a qualified herbalist, making a GST-free supply under subsection 38-10(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a herbal mixture to a patient during a GST-free herbal medicine service, where the mixture is for use after the consultation?

No, the entity is not making a GST-free supply under subsection 38-10(4) of the GST Act when it supplies a herbal mixture to a patient during a GST-free herbal medicine service, where the mixture is for use after the consultation. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a qualified herbalist. The entity supplies a herbal medicine service to a patient. This service is GST-free under subsection 38-10(1) of the GST Act.

During this service, the entity supplies a herbal mixture to the patient. This herbal mixture is customised for the exclusive treatment of the particular patient's illness or disability and is to be used by the patient after the consultation.

The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Subsection 38-10(4) of the GST Act provides that the supply of goods is GST-free if: • the supply is made to a person in the course of supplying to the person a service referred to in item 8 or 9 in the table in subsection 38-10(1) of the GST Act; and • it is supplied, and used or consumed, at the premises at which the service is supplied.

Item 8 in the table in subsection 38-10(1) of the GST Act lists 'Herbal medicine (including traditional Chinese herbal medicine)'. The entity is supplying a GST-free herbal medicine service to the patient. Therefore, it is necessary to determine whether the supply of the goods is 'in the course of supplying' the GST-free herbal medicine service.

It is considered that the phrase 'in the course of supplying' in the context of subsection 38-10(4) requires that the goods must be supplied at the same point in time as the GST-free health service and must have been either: • customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free service; or • necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation.

The entity supplies the herbal mixture to the patient during the consultation and therefore the mixture is supplied at the same point in time as the GST-free herbal service. Additionally, the herbal mixture is customised for the exclusive treatment of the illness or disability of the entity's patient who is the recipient of the GST-free herbal service. Therefore, the first requirement in subsection 38-10(4) of the GST Act is met.

The second requirement of subsection 38-10(4) of the GST Act is that the goods must be supplied and used or consumed at the premises where the service is supplied.

The entity supplies the herbal mixture during the consultation and it is therefore supplied at the premises where the service is supplied. However, the herbal mixture is to be used by the patient after the consultation. Therefore, the herbal mixture is not used or consumed at the premises where the service is supplied and the second requirement of subsection 38-10(4) of the GST Act is not met. Consequently, the supply is not GST-free under subsection 38-10(4) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a herbal mixture to a patient during a GST-free health service, where the mixture is to be used after the consultation. [Note: It is considered that for the purposes of subsection 38-10(4) the goods supplied must be completely used or consumed at the premises at which the GST-free service is supplied. If the goods are only partially consumed, the goods have not been 'used or consumed at the premises' and only the portion consumed at the premises will be GST-free under subsection 38-10(4) of the GST Act.]