ATO ID 2003/10: GST and goods supplied after conclusion of GST-free other health service
Date of decision: 5 December 2001
Business line: Indirect Tax

Issue
Is the entity, a health professional, making a GST-free supply under subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies goods to a client after the conclusion of a GST-free consultation?

Decision
No, the entity is not making a GST-free supply under subsection 38-10(3) of the GST Act when it supplies goods to a client after the conclusion of a GST-free consultation. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a health professional. The entity supplies a client with a health service that is GST-free under subsection 38-10(1) of the GST Act. Because of this health service, the entity establishes that the client requires certain goods for their treatment. The entity does not have the goods in stock at the time of consultation. The entity orders the goods and supplies them to the client on a subsequent day after they have been delivered. The supply of the goods occurs at the same premises at which the GST-free health service was supplied. The entity does not provide any health services to the client at the time of supplying the goods. The goods are not GST-free medical aids or appliances under subsection 38-45(1) of the GST Act. The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist. The goods are not 'Other GST-free health goods' under subsection 38-47(1) of the GST Act. The goods are not GST-free drugs or medicinal preparations under section 38-50 of the GST Act. The entity is registered for goods and services tax (GST) and the supply of the goods satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if: The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist and has supplied its client with a GST-free health service under subsection 38-10(1) of the GST Act. The entity also supplies the goods from the same premises at which the GST-free health service was supplied. Therefore, it needs to be determined whether the entity is supplying the goods 'in the course of supplying' the GST-free health service. For goods to be supplied 'in the course of supplying to the person a service', in the context of subsection 38-10(3) of the GST Act, the goods must be supplied at the same point in time at which the GST-free health service is supplied. In addition, the goods have to be either: The entity does not have the goods in stock at the time of the GST-free consultation. The entity orders the goods and, after they have been delivered, supplies the goods to its patient. Therefore, the goods are not supplied at the same point in time as the GST-free consultation. In addition, when the entity finally does supply the goods to the client, it does not provide the client with any further health services. The entity is merely making a sale of goods. As such, the entity is not making a GST-free supply of goods under subsection 38-10(3) of the GST Act as the entity is not supplying the goods to its client 'in the course of supplying' its GST-free health service. 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 neither GST-free under any other provision in 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 goods to a client after the conclusion of a GST-free consultation.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-10(1) subsection 38-10(3) subsection 38-10(4) section 38-45 subsection 38-45(1) section 38-47 subsection 38-47(1) section 38-50 Division 40
Other references: Health Industry Partnership - Issues Register - issue 2.b
Subject references: Goods & services tax GST free GST health Section 38-10 - other health services GST supplies & acquisition Taxable supply