ATO ID 2002/143: GST and a supply of anti-inflammatory gel to an individual
Date of decision: 29 November 2001
Business line: Indirect Tax

Issue
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?

Decision
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.

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

Reasons for decision
Summary: 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: 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. | Detailed Reasoning - Subsection 38-50(1): 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: 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. | Detailed Reasoning - Subsection 38-50(2): 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. | Detailed Reasoning - Subsection 38-50(4): 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 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. | Detailed Reasoning - Subsection 38-50(4A): 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: 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. | Detailed Reasoning - Subsection 38-50(5): Under subsection 38-50(5) of the GST Act, a supply of a medicinal preparation is GST-free if: 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: 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. | Detailed Reasoning - Subsection 38-50(6): Under subsection 38-50(6) of the GST Act, a supply of a medicinal preparation is GST-free if: 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.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-50 subsection 38-50(2) subsection 38-50(7) Division 40
Other references: The Standard for the Uniform Scheduling of Drugs and Poisons (SUSDP) GST-free Supply (Drugs and Medicinal Preparations) Determination 2004 (No.2)
Subject references: Goods & services tax GST free GST health Section 38-50 - drugs & medicinal preparations GST supplies and acquisitions Taxable supply