1: Is the supply of a product (Product) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?
1: Yes, the supply of the Product is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.
You are registered for goods and services tax (GST). You carry on an enterprise that involves supplying products to customers in Australia including Product 1. The Product is regulated in Australia by the Therapeutic Goods Administration (TGA) requiring entry in the Australian Register of Therapeutic Goods (ARTG). The Product is issued with an ARTG ID with details of the Products entry set out in the public summary of entry on the TGA website (ARTG Summary). The Product display's its respective AUST L numbers (corresponding to their ARTG ID number) on the label of the outer packaging indicating that the product is regulated by the TGA as a therapeutic good under the listed medicines framework. Details in relation to the Product is set out in the table in Appendix B which forms part of the Scheme:
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 38-47 A New Tax System (Goods and Services Tax) Act 1999 section 195-1
Under section 9-40 of the GST Act, goods and services tax (GST) is payable on any taxable supply that you make. However, a supply is not a taxable supply if, amongst other things, the supply is GST-free or input taxed. Other GST-free health goods Subsection 38-47(1) of the GST Act relevantly provides that a supply is GST-free if it is a supply of goods of a kind that the Health Minister, by determination in writing, declares to be goods the supply of which is GST-free. The Health Minister has made the A New Tax System (Goods and Services Tax) (GST-free Health Goods) Determination 2022 ( Health Minister'sDetermination) and declared at section 5 (Section 5) that for the purposes of subsection 38-47(1) of the GST Act, goods of a kind that are: (a) specified in an item of the table in Schedule 1 to the Health Minister's Determination (Schedule 1); and (b) required, or in a class of goods required, to be included in the ARTG under the Therapeutic Goods Act 1989 (TG Act). Are goods the supply of which is GST-free Item 5 in Schedule 1 to the Health Minster's Determination (Item 5) specifies as a health good: Sunscreen preparations for dermal application that:
(a) are marketed principally for use as sunscreen; and (b) have a sun protection factor (SPF) of 15 or more. The Commissioner's preliminary view on when a supply of a sunscreen product is GST-free is outlined in Draft Goods and Services Tax Determination GSTD 2024/D2 Goods and Services Tax: supplies of sunscreen (GSTD 2024/D2). Having regard to the legislative requirements, a supply of a product that contains sunscreen is GST-free, if that product is of a kind of sunscreen preparation for dermal application, with SPF of 15 or more, that is required to be included on the ARTG and is marketed principally for use as a sunscreen. [1] Of a kind The phrase 'of a kind' is not defined in the GST Act nor the Determination, however, it has been considered in the GST context in Cascade Brewery [2] , Lansell House FCA [3] , Lansell House FCAFC [4] , and more recently, Simplot . [5] A product will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the class or genus in question. [6] The phrase 'of a kind' was considered in Simplot in the context of food being 'marketed as a prepared meal', at [98] per Hespe J:
'The phrase "of a kind" is to be given operative effect. The words "of a kind" are words of expansion rather than limitation: Cascade Brewery at [16] (Sundberg J). In the present case, the relevant class or genus of sunscreen products, the supply of which is GST-free, has been determined by the Health Minister as having the following four attributes: a. Sunscreen preparation for dermal application; and b. SPF of 15 or more; and c. is required to be included in the ARTG; and d. is marketed principally for use as sunscreen. Dermal application GSTD 2024/D2 outlines that a sunscreen preparation for dermal application is a preparation containing sunscreen that is manufactured or compounded for application to the skin (including the lips) to reduce the incidence of skin damage caused by exposure to ultraviolet ('UV') radiation. [7] Further, sunscreen preparations may be in various forms including creams, lotions, gels, balms, oils, or mousses and be packaged in bottles, tubes, pump packs, sprays, or sticks. [8] SPF of 15 or more
As explained in paragraphs 14 and 15 of GSTD 2024/D2, the SPF of a sunscreen product is determined in accordance with the Australian Sunscreen Standards. [9] Products with an SPF of 15 or more will have the required attribute, while supplies of products with an SPF of less than 15 are not GST-free. Required to be included in the ARTG Paragraph 16 of GSTD 2024/D2 explains that unless excluded or exempt, therapeutic sunscreens are required by the TGA to be listed or registered in the ARTG before they can legally be supplied in Australia. [10] Furthermore, a sunscreen that is included in the ARTG must show its listing or registration number on the labelling and packaging. Most sunscreen products required to be on the ARTG are listed medicines and have an 'AUST L' identification number on the product. Sunscreen products that are required to be registered have an 'AUST R' number. [11] Marketed principally for use as sunscreen The marketed use of a product is to be determined objectively, having regard to what a reasonable observer would understand from the content of the marketing. [12] Marketed
The words 'marketed' and 'marketed principally' take their ordinary meaning in context as these terms are not defined in the GST Act or the Determination. [13] The meaning of marketing was considered in a GST context in Cascade Brewery , which referred to the dictionary definitions of 'marketing' at [24] per Sunberg J as the: 'total process whereby goods are put onto the market' [14] 'action or business of promoting and selling products, including market research and advertising '. [15] Paragraph 22 of GSTD 2024/D2 explains that the activities of all suppliers in a supply chain will be relevant, including those of a manufacturer, importer, wholesaler, retailer, as well as competitors, to identifying the genus, class, or category of products marketed principally for use as sunscreen. [16] The content of the marketing is what those activities objectively convey to the market. [17] Marketing does not include internal activities of the seller, nor is it determined by the subjective intention or motivation of the seller or the actual or intended use by the consumer. These things do not convey any message to the market. [18] This view is based on Simplot , where it was considered that '
the marketing practices of the taxpayer itself will not be determinative ' of the matter. [19] The content of marketing was addressed in Simplot at [108] per Hespe J: '...The content of the marketing is to be distinguished from the seller's aims and hopes in respect of the marketing. The content of the marketing is determined having regard to what a reader of the labels and printed advertising materials or viewers of television or web advertisements would derive from them...' The requirement for objectivity was also confirmed in Simplot at [129] per Hespe J: '...A taxpayer by their own marketing behaviours cannot dictate the characterisation of their product when the statutory question directs attention not to the specific product but to products "of a kind". A more objective approach is required.' According to the above authorities, no one factor is definitive but together they are useful in forming an overall impression of the principal marketed use of a product, determined objectively. Principally Principally means ' mainly, chiefly, predominantly or preponderantly' . [20]
The word 'principally' adds a criterion that the relevant class or genus of products must be marketed principally for use as sunscreen. Under the Therapeutic Goods Advertising Code [21] and TGA Regulatory Guidelines [22] , there are certain labelling and advertising requirements for therapeutic goods including sunscreens. Due to the need to meet the sunscreen labelling and advertising requirements, it is likely that sunscreen products listed on the ARTG will have references in their marketing to their sunscreen function. However, as explained in paragraph 24 of GSTD 2024/D2, it will be insufficient that a product has some marketing for use as a sunscreen. To be included in the relevant class or genus so that the supply is GST-free, the product must be 'marketed principally for use as sunscreen'. Use as sunscreen Sunscreen is used to protect the skin from the harmful effects of the sun. Over-exposure to UV radiation causes eye damage, sunburn, tanning and other skin damage that can ultimately result in skin cancer. It is also recognised that the effects of sun damage to the skin includes premature ageing of the skin. [23]
The Australian Radiation Protection and Nuclear Safety Agency ('ARPANSA') [24] states: 'Application of sunscreens as part of your daily routine is an effective method of sun protection when used with a combination of other protective measures.' 'Overexposure to ultraviolet radiation (UVR) causes eye damage, sunburn, tanning and other skin damage that can ultimately result in skin cancer.' For sunscreen to provide effective protection from UV radiation, it is recommended that it is: [25] • carefully and generously applied to skin before going outside, • reapplied at regular intervals, • reapplied after swimming, sweating or towel drying, • used within the use-by-date and stored in cool, dry conditions, and • used in combination with other sun protection measures for best protection (such as protective clothing, hat and sunglasses and seeking shade when possible). TGA Regulatory Guidelines [26] allow therapeutic sunscreens to make the following indications, and the Commissioner recognises that these statements in marketing are consistent with the use of a product as sunscreen: [27]
• For therapeutic sunscreens with SPF 4+: o Can aid in the prevention of premature skin ageing. • For therapeutic sunscreens with SPF 30+: o Can aid in the prevention of solar keratosis, o Can aid in the prevention of sunspots, o May reduce the risk of some skin cancers, and o May assist in preventing some skin cancers It is relevant to note that inclusion of the above directions and indications is not determinative of the marketed use of a product. However, the absence of such is uncharacteristic of the kind of products marketed principally for use as sunscreen. [28] Relevant factors While no single factor is determinative, some factors such as labelling and packaging (including name), promotion and advertising, and product placement may carry more weight than others. [29] Labelling and packaging, including the naming of the product, will be of particular importance to the formation of an overall impression of the product's marketed use. This is to be weighed against the impressions gained from other forms of marketing. [30]
Where a product is advertised as having a use additional to a sunscreen use, the name of the product can be an important indication of which use is primary. [31] It is also relevant to consider the ordering and sizing of marketing content on the label and packaging. [32] Marketing materials published on websites or in other advertisements (print, video, other media) are an important factor. GSTD 2024/D2 explains that it is common for product advertising to be prepared and endorsed by the brand itself for use broadly by retail outlets. This marketing material will therefore be consistent and prominent across the market. As a result, it will generally be more persuasive in assessing the marketed use of the product than additional or ancillary advertising by an individual retailer. [33] In terms of product placement, categorisation of a product by the brand itself will be more persuasive than that of individual retailers in establishing the principally marketed use of a product. [34] However, where products are not placed according to use, the product placement will carry less weight in the overall assessment of the marketing. [35]
Regarding the weighting of relevant factors, the Federal Court in Lansell House FCA [36] at [108] per Sunberg J referred to Procter & Gamble [37] in the context of classification: 'In Procter & Gamble the VAT and Duties Tribunal did not "grade" the relevant factors in coming to its decision. It stood back and took all the factors of appearance, taste, ingredients, process of manufacture, marketing and packaging together in deciding the proper classification of "Regular Pringles". The Court of Appeal approved that approach. Lord Justice Jacob said at [19]: It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist's balance. In the end it was a matter of overall impression.'
Accordingly, whether a sunscreen product is of a genus, class, or category of products marketed principally for use as a sunscreen is a matter of 'overall impression'. Where there is no clear principal use discernible from the marketing of a product, it will not be of a kind marketed principally for use as sunscreen. [38] Marketed for use other than sunscreen In some cases, a sunscreen product may be marketed solely for use as a sunscreen. If so, the product will be of a kind marketed principally for use as sunscreen. [39] However, where other functions or benefits are represented in the marketing, the overall marketing will need to be considered to determine if sunscreen is the principally marketed use. Determining whether these characteristics or features are marketed as a separate use or merely compliment the use as a sunscreen requires an objective assessment of the marketing of the product. Where the overall impression of a products marketing is that: a. the main/chief marketed use is something other than sunscreen, or b. the sunscreen use and other use/s are evenly marketed, or
c. no clear conclusion of sunscreen as the main/chief marketed use can be reached; the product will not be one that is marketed principally for use as sunscreen and will not be GST-free. Application of law to the scheme The Product possess the following distinguishing qualities in common with the class or genus of 'sunscreen preparations': • is for dermal application being presented as a lotion, cream or oil or spray to be applied topically to the skin. • has an SPF of 15 or more. • displays an AUST L number (ARTG number) present on the Product's packaging evidencing that it is included (and required to be included) on the ARTG under the TG Act. Factors in determining whether the Product is marketed principally for use as sunscreen are considered below. Marketed principally for use as sunscreen Product
Having had regard to the total marketing process and those individual factors in that process whereby the Product is put on the market for sale, the overall impression is that the Product is marketed principally for use as a sunscreen. As the Product meets the requirements of a sunscreen preparation for dermal application marketed principally for use as sunscreen with an SPF of more than 15, the Product is specified in Item 5. Conclusion Accordingly, as the supply of the Product satisfies the requirements under section 5 of the Health Minister's Determination of being a good of a kind that is: • specified in an item (Item 5) of the table in Schedule 1 and • required, or in a class of goods required to be included in the ARTG under the TG Act, the supply of the Product is GST-free under subsection 38-47(1) of the GST Act. > [1] Paragraph 8 of GSTD 2024/D2. [2] Cascade Brewery Company Pty Ltd & Anor v FCT [2006] FCA 821 (' Cascade Brewery '). [3] Lansell House Pty Ltd v Commissioner of Taxation [2010] FCA 329 (' Lansell House FCA' ). [4] Lansell House Pty Ltd v Commissioner of Taxation [2011] FCAFC 6 (' Lansell House FCAFC' ). [5]
Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115 (' Simplot '). [6] Lansell House FCA at [19]; Lansell House FCAFC at [30]. [7] Paragraph 12 of GSTD 2024/D2. [8] Paragraph 13 of GSTD 2024/D2. [9] Department of Health and Aged Care, Therapeutic Goods Administration (2023) Australian regulatory guidelines for sunscreens, version 3.0, https://www.tga.gov.au/resources/resource/guidance/australian-regulatory-guidelines-sunscreens-args, which describe the regulatory requirements and standards for sunscreens regulated as therapeutic goods in Australia by the TGA. [10] Sections 25 and 26A of the Therapeutic Goods Act 1989 . [11] Paragraph 17 of GSTD 2024/D2. [12] Paragraph 20 of GSTD 2024/D2, citing Simplot at [108]. [13] Lansell House FCA at [14]-[18]. Sundberg J adopted the approach taken in Zeroz Pty Ltd v Deputy Commissioner of Taxation (1997) 35 ATR 349 at 357, that unless there was a trade usage to be attributed to a word in the sales tax legislation, words were to be given their ordinary meaning. This approach was endorsed in Comptroller General of Customs v Pharm-A-Care Laboratories Pty Ltd [2018] FCAFC 237 at [24]. [14] Macquarie Dictionary, cited in
Cascade Brewery at [24]. [15] Australian Oxford Dictionary, cited in Cascade Brewery at [24]. [16] Simplot at [106]; Cascade Brewery at [11]. [17] Paragraph 22 of GSTD 2024/D2, citing Simplot at [105], [108] and [110]. [18] Paragraph 23 of GSTD 2024/D2, citing Simplot at [108]. [19] Simplot at [107]. [20] Cascade Brewery at [61]. [21] Therapeutic Goods (Therapeutic Goods Advertising Code) Instrument 2021. [22] TGA Australian Regulatory Guidelines for Sunscreens (Version 3 - May 2023). [23] Paragraph 26 of GSTD 2024/D2. [24] ARPANSA is the Australian Government's primary authority on radiation protection and nuclear safety. https://www.arpansa.gov.au/ Webpage viewed 18 July 2024 which contains advice on reducing health effects associated with ultraviolet radiation exposure from the sun. Sun protection | ARPANSA https://www.arpansa.gov.au/understanding-radiation/radiation-sources/sun-radiation Webpage viewed 18 July 2024. [25] Sun protection using sunscreens | ARPANSA Webpage accessed 8 August 2024: [26] TGA Australian Regulatory Guidelines for Sunscreens (Version 3 - May 2023) at page 13. [27] Paragraph 26 of GSTD 2024/D2. [28] Paragraph 29 of GSTD 2024/D2. [29]
Paragraph 21 of GSTD 2024/D2, citing Cascade Brewery at [23]. [30] Paragraph 34 of GSTD 2024/D2. [31] Paragraph 35 of GSTD 2024/D2. [32] Paragraph 37 of GSTD 2024/D2. [33] Paragraph 40 of GSTD 2024/D2. [34] Paragraph 41 of GSTD 2024/D2. [35] Paragraph 42 of GSTD 2024/D2. [36] Lansell House FCA was upheld on appeal in Lansell House FCAFC . [37] Commissioners for Her Majesty's Revenue & Customs v Procter & Gamble UK [2009] STC 1990 (' Procter & Gamble' ). [38] Paragraph 25 of GSTD 2024/D2. [39] Paragraph 30 of GSTD 2024/D2.