GST and a supply of anti-inflammatory gel to an individual

Is the entity, a pharmacist, making a GST-free supply under section 38-50 of the A New Tax System (Goods and Services) Act 1999 (GST Act), when it supplies anti-inflammatory gel to an individual?

No, the entity is not making a GST-free supply under section 38-50 of the GST Act when it supplies anti-inflammatory gel to an individual. The entity is making a taxable supply under section 9-5 of the Act.

The entity is a pharmacist. The entity is supplying anti-inflammatory gel to an individual, to be used for private or domestic consumption.

Anti-inflammatory gel is a medicinal preparation that is applied to the skin of an individual to relieve swelling or soreness in a particular limb or part of the body and is for human use.

Further: • The supply of the anti-inflammatory gel is not restricted under any State or Territory legislation • The anti-inflammatory gel is supplied on prescription. However, the medicinal preparation is not required by State or Territory Law to be supplied on prescription; • The anti-inflammatory gel contains an analgesic; • The anti-inflammatory gel is not a pharmaceutical benefit (within the meaning of Part VII of the National Health Act 1953 ); • The anti-inflammatory gel is not a pharmaceutical benefit (within the meaning of section 91 of the Veterans' Entitlements Act 1986 ); • The anti-inflammatory gel is not a pharmaceutical benefit (within the meaning of section 5 of the Military Rehabilitation and Compensation Act 2004 ); • The anti-inflammatory gel is not for consumption by mouth; • The anti-inflammatory gel is not a supply under the Special Access Scheme (SAS); • The anti-inflammatory gel is in a class of goods that are required to be registered under the Therapeutic Goods Act 1989 .

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

Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. For a supply of a medicinal preparation to be GST-free under section 38-50 of the GST Act, the supply must first satisfy the requirements in subsection 38-50(7) of the GST Act. Where this condition is satisfied, the supply must also satisfy all the requirements as contained in subsections 38-50(1), 38-50(2), 38-50(4), 38-50(4A), 38-50(5) or 38-50(6) of the GST Act.

Subsection 38-50(7) of the GST Act provides that a supply of a medicinal preparation is GST-free under this section if, and only if: • the drug or medicinal preparation is for human use or consumption; and • the supply is to an individual for private or domestic use or consumption.

Anti-inflammatory gel is a medicinal preparation that is for human use. The recipient of the supply is an individual who will use the anti-inflammatory gel for private or domestic use or consumption. Therefore, the supply of the anti-inflammatory gel meets the requirements of subsection 38-50(7).

As this requirement has been satisfied, to determine whether the supply is GST-free, it is necessary to consider whether the anti-inflammatory gel satisfies the other legislative requirements.

Under subsection 38-50(1) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: • its supply without prescription is restricted; or • the medicinal preparation is a pharmaceutical benefit (within the meaning of Part VII of the National Health Act 1953 ).

Although the anti-inflammatory gel may be prescribed by a medical practitioner, the supply of the anti-inflammatory gel is not restricted. In addition, the anti-inflammatory gel is not a pharmaceutical benefit under the National Health Act 1953 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(1) of the GST Act.

Under subsection 38-50(2) of the GST Act, a supply of a medicinal preparation is GST-free if the supply is restricted under a State or Territory law in which it is supplied, but may be made by a medical practitioner, dental practitioner, pharmacist or any other person permitted by or under that law to do so.

The supply of the anti-inflammatory gel in Australia is not restricted under a State or Territory law. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(2) of the GST Act.

Under subsection 38-50(4) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: • the medicinal preparation is a pharmaceutical benefit (within the meaning of section 91 of the Veterans' Entitlements Act 1986 ); and • it is supplied under an approved scheme (within the meaning of that section).

The anti-inflammatory gel is not a pharmaceutical benefit under the Veterans' Entitlements Act 1986 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(4) of the GST Act.

Under subsection 38-50(4A) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: • it is supplied as a pharmaceutical benefit (within the meaning of section 5 of the Military Rehabilitation and Compensation Act 2004 ); and • it is supplied in accordance with a determination made under paragraph 286(1)(c) of that Act.

The anti-inflammatory gel is not a pharmaceutical benefit under the Military Rehabilitation and Compensation Act 2004 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(4A) of the GST Act.

Under subsection 38-50(5) of the GST Act, a supply of a medicinal preparation is GST-free if: • the medicinal preparation is an analgesic with a single active ingredient; • it would be GST-free under subsection 38-50(2) if supplied in a larger quantity; and • the Health Minister has determined, in writing, that the supply of that analgesic is GST-free.

The GST-free Supply (Drugs and Medicinal Preparations) Determination 2004 (No.2)(the Determination), specifies the circumstances where an eligible analgesic is GST-free under subsection 38-50(5) of the GST Act.

The Determination provides that for a supply of a drug or medicinal preparation to be GST-free under this subsection the drug or medical preparation: • is required, under the Therapeutic Goods Act 1989 , to be registered or listed, or included in a class of goods required to be registered or listed; and • contains aspirin or paracetamol or ibuprofen; and • is intended to be taken by mouth.

In the present circumstances, the supply of the anti-inflammatory gel is not a supply of an analgesic that is determined by the Health Minister, in the Determination, to be GST-free as the anti-inflammatory gel is not to be taken by mouth. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(5) of the GST Act.

Under subsection 38-50(6) of the GST Act, a supply of a medicinal preparation is GST-free if: • the medicinal preparation is the subject of an approval under paragraph 19(1)(a) of the Therapeutic Goods Act 1989 (TGA), and any conditions to which the approval is subject have been complied with; or • the medicinal preparation is supplied under an authority under subsection 19(5) of the TGA, and the supply is in accordance with any regulations made for the purposes of subsection 19(7) of the TGA; or • the medicinal preparation is exempted from the operation of Part 3 of that Act under regulation 12A of the Therapeutic Goods Regulations.

This subsection applies to supplies of drugs and medicinal preparations that are supplied under the SAS. The SAS allows new drugs and medicinal preparations, which have not yet been approved for supply in Australia, to be supplied to patients who have life-threatening or other serious illnesses.

The supply of the anti-inflammatory gel is not a supply under the SAS. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(6) of the GST Act.

The supply of the anti-inflammatory gel is neither GST-free under any other provisions of Division 38 of the GST Act nor 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 anti-inflammatory gel to an individual. [HISTORY: ATO ID 2002/143 was amended on 18 May 2007. The amendment is made to update the reference to the current Determination. This does not change the decision as it applied under previous Determinations. Also, the amendment is made to include subsection 38-50(4A) which applies to net amounts for tax periods starting, or that started, on or after 1 July 2004.]