Private ruling: GST classification of goods supplied in relation to GST-free health services

Ruling: Q1: Are your supplies of prescriptions (and repeats of those prescriptions) of traditional Chinese granule herb preparations (the prescriptions), which are dispensed and mixed on your premises by a person who is a recognised professional in both Chinese herbal medicine and acupuncture, as a result of only a herbal medicine consultation, GST-free? | A1: Your supplies of these prescriptions are GST-free only if the prescriptions are sold, and used or consumed, on the premises where the consultation was held (your premises). | Q2: Are your supplies of the prescriptions (and repeats of those prescriptions) as a result of an acupuncture consultation or a previous acupuncture consultation GST-free? | A2: Yes, your supplies of these prescriptions are GST-free irrespective of where they are used or consumed, as long as they are sold at the premises in which you provided the acupuncture consultation.

Relevant facts and circumstances: You are registered for GST. Your business is run a by recognised professional in acupuncture and traditional Chinese herbal medicine, who is a government registered practitioner of Chinese Herbal Medicine and Acupuncture and an accredited member of the Australian Traditional Medicine Society. You have advised that the kind of services of herbal medicine and acupuncture you provide are accepted, in the associated professions of traditional Chinese medicine and acupuncture, as being necessary for the appropriate treatment of the recipients of your services. You purchase the granule herbs from a wholesaler as single herb containers. These granule herbs are opened on your premises then added with other single herbs to make a formula. Different formulas and dosages apply to different patients. All Chinese herbal prescriptions you sell to clients are prepared on the same premises where you provide all your services. They are usually prescribed for the patient to use at home after either an initial herbal medicine or acupuncture consultation or both. It is common practice for you to not always perform acupuncture in conjunction with the prescription of Chinese herbs but to provide a herbal consultation only. In addition to this you issue repeat Chinese herbal prescription without further consultations.


Reasons for decision: Summary: Note: All references to legislation in this reasons for decision refer to A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless otherwise stated. Section 38-10 sets out what 'Other health services' (health services) are GST-free and what supplies of goods and services associated with these supplies are GST-free. Subsection 38-10(1) provides that the supply of services: · must be of a kind specified in the table in the section or of a kind specified in the regulations and · the supplier is a recognised professional (recognised professional is defined in section 195-1) in relation to the supply of the service, and · the supply would generally be accepted in the profession associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply. The health services listed in the table under subsection 38-10(1) include acupuncture services and herbal medicine (including traditional Chinese Herbal medicine). If you are able to provide GST-free health services under subsection 38-10(1), you may be eligible to provide goods GST-free in relation to those services. | Detailed Reasoning - Goods supplied in the course of supplying GST-free health services:: To determine the GST classification of supplies of herbal medicine prescriptions and acupuncture prescriptions, it is necessary to consider two subsections under section 38-10 which deal with the supply of goods associated with certain other health services set out in section 38-10. · subsection 38-10(3) governs the supply of goods in the course of acupuncture services · subsection 38-10(4) governs the supply of goods in the course of herbal medicine services (including traditional Chinese herbal medicine services). | Detailed Reasoning - General Requirements:: Subsections 38-10(3) and 38-10(4) both provide that a supply of goods will be GST-free where, amongst other things, the goods are supplied 'in the course of supplying' a GST-free health service. The phrase 'in the course of supplying a GST-free health service' used in both of these subsections is interpreted to require that the goods are supplied at the same point in time at which a GST-free health service is supplied. In addition, in accordance with the Health Industry Partnership - issues register on our website www.ato.gov.au (Issue 1.c. Goods supplied 'in the course of supplying' a GST-free *medical service) the goods must also have been either: · customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free health service, or · necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation. Either one of these general requirements must be satisfied in relation to supplies of goods made under either subsection 38-10(3) or subsection 38-10(4). In your case, you have advised that you purchase the granule herbs from a wholesaler as single herb containers. These herbs are prepared on the premises then added with other single herbs to make a formula. Different formulas and dosages apply to different patients in the course of supplying services of either herbal medicine or acupuncture, or a combination of the two. Therefore, as the prescriptions you provide are customised and made to suit the needs of different patients they meet the general requirements discussed above. As a practitioner of both acupuncture and herbal medicine, you may make supplies of customised herbal prescriptions in the course of either your acupuncture or herbal medicine services or alternatively in the course of supplying a combination of these services. So the scenarios in which the prescriptions are dispensed will be covered in the answers below. | Detailed Reasoning - Question 1: In your case, your services of herbal medicine are GST-free as you meet the requirements of subsection 38(1) because: · your service is specified in the table under subsection 38(1) · you are a recognised professional (in accordance with its meaning in section 195-1) in herbal medicine, and · you have advised that your supplies are generally accepted in the profession of traditional Chinese herbal medicine, as being necessary for the appropriate treatment of the recipient of the supply. As discussed earlier, subsection 38-10(4) covers supplies of goods made in the course of herbal medicine services. Paragraph 38-10(4)(b) requires that the goods be supplied, and used or consumed at the premises at which the service is supplied. Therefore, your supplies of the prescriptions are GST-free, when they are used or consumed on your premises where you provide herbal medicine consultations. In the case, where you dispense repeat prescriptions relating to the initial consultation, the supplies of the prescriptions are also GST-free if they are consumed on the premises. You have advised us of your opinion that since you are a recognised professional for providing both acupuncture and Chinese herbal medicine services, your herbal prescriptions prescribed to your patients for use or consumption away from your premises ('prescribed for home use') in which you provided the herbal consultation should still be GST-free, even if you have not provided acupuncture services. However, the GST Act clearly distinguishes the requirements to make GST-free supplies of the goods in the course of providing herbal medicine services from the requirements to make GST-free supplies of the goods in the course of providing acupuncture services. If, therefore, the prescriptions are dispensed to a person without you also providing an acupuncture service (even at an earlier time), the prescriptions will only be GST-free when consumed or used on your premises. | Detailed Reasoning - Question 2: You are a recognised professional in acupuncture. The remaining requirements of subsection 38-10(1) are also met. You may therefore be eligible to provide goods in the course of providing these services. Paragraph 38-10(3)(b) requires that the goods are supplied on the premises on which the service (acupuncture) was provided. It does not matter where the goods are used or consumed by the patient. In your case, all your supplies of goods relating to acupuncture are GST-free when you sell them on the premises in which you provided acupuncture services. In the case, where you dispense repeat prescriptions relating to the initial consultation, the supplies of these goods are also GST-free.

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