GST and supply of drugs and medicinal preparations to a medical practitioner or hospital

Is the entity, a supplier of drugs and medicinal preparations, making a GST-free supply under section 38-50 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies drugs and medicinal preparations to a medical practitioner or hospital?

No, the entity is not making a GST-free supply under section 38-50 of the GST Act when it supplies drugs and medicinal preparations to a medical practitioner or hospital. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a supplier of drugs and medicinal preparations. The entity supplies drugs and medicinal preparations to medical practitioners and hospitals.

The drugs and medicinal preparations include: • prescription drugs and medicines; • Pharmaceutical Benefits Scheme (PBS) drugs and medicines; • drugs and medicines approved 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. 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, 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.

The entity supplies drugs and medicinal preparations that are for human use or consumption. However, the supply is not to an individual for their private or domestic use or consumption. Rather, it is made to a medical practitioner or hospital. Therefore, the supply does not satisfy the second requirement in subsection 38-50(7) of the GST Act. As such, the supply is not GST-free under section 38-50 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. Further, the supply 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 drugs and medicinal preparations to a medical practitioner or hospital.

[Note: the supply by a medical practitioner or hospital to a patient for their treatment is a supply to an individual for private or domestic use or consumption. This supply to the patient is GST-free where it satisfies all of the requirements of any of the following subsections: subsections 38-50(1), 38-50(2), 38-50(4), 38-50(5) or 38-50(6) of the GST Act. The supply is also GST-free if it satisfies all of the requirements of either subsection 38-7(3) or subsection 38-20(3) of the GST Act.]