Private ruling: Sunscreen
Published: March 2013

Ruling: Q1: Will the Commissioner confirm that the supply of the Subject Products is GST-free? | A1: No. The supply of the Subject Products is not GST-free.

Relevant facts and circumstances: · You are registered for the goods and services tax (GST). · You supply a number of products, under your company brand name. · These products shall be called "Subject Products". You submitted advertising and consumer information published by you which describe the Subject Products as ultra protective daily moisturisers SPF 30+. · In these publications you describe, among other things, the advertised items as providing protection as sunscreens. However, they are not advertised or supplied to the market exclusively as sunscreen products. · The product brochures state that the Subject Products contain broad spectrum sunscreens which block out UVA and UVB rays while providing the skin protection against dehydration and environmental stress with a number of potent antioxidants and moisturisers. · You informed us that the Subject Products can only be purchased from retailers ranging from traditional department stores, beauty therapists and day spas to cosmetic physicians. These and similar products by other manufacturers are displayed under their respective brand names. · The products are not generally sold through supermarkets and other retail outlets but sold almost exclusively through selected stores. Further, the products are not located under general shelf space allocated for sunscreen products of different manufacturers. · The products have their own Australian Register of Therapeutic Goods entries with distinctive numbers and categorised under product category "Medicine" and the products described by their commercial descriptions.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 38-47

Reasons for decision: Summary: Under subsection 38-47(1) of the GST Act a supply of other health goods 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 Determination has been released for the purposes of subsection 38-47(1) of the GST Act. The Determination states that for subsection 38-47(1) of the GST Act, the supply of goods of the kind described in an item in Schedule 1 is GST-free if, under the Therapeutic Goods Regulations 1990, the goods are required to be registered or listed, or are goods in a class of goods required to be registered or listed. Item 5 of Schedule 1 of the Determination includes: Sunscreen preparations for dermal application that: (a) are marketed principally for use as sunscreen; and (b) have a sun protection factor rating of 15 or more. Each of the above elements must be satisfied before a product will be a GST-free sunscreen preparation. The Subject Products have a sun protection factor rating of 30+, are for dermal application that is for use on the skin and are listed on the Australian Register of Therapeutic Goods. Accordingly, these requirements are satisfied. Therefore the only criterion to consider is whether the Subject Products are marketed principally for use as sunscreens. Sunscreen is defined in the Macquarie Dictionary 3rd Edition (Macquarie Dictionary) as a cream or lotion which, when applied to the skin, protects it against damage from the rays of the sun. Preparation is defined in the Macquarie Dictionary as something, prepared, manufactured or compounded. It is therefore considered that a sunscreen preparation is a preparation, manufactured or compounded, for application to the skin, to reduce the incidence of skin damage caused by exposure to the rays of the sun. | Detailed Reasoning - Marketed principally for use as a sunscreen: Item 91 of Schedule 1 to the Sales Tax Act stated that goods marketed principally for use as sunscreen preparations for humans and included in the Australian Register of Therapeutic Goods, were Sales Tax exempt. Sales Tax Ruling SST12 Classification of drugs, medicines and sunscreen preparations established that in determining whether a good was marketed principally for use as sunscreen preparations reference was to be made to the total process through which goods were put on the market. Indicators included the products name, labelling and packaging, advertising, consumer information, retail outlets in which the goods can be purchased and product location within those retail outlets. It is considered that the same interpretation is to be given to the meaning of the phrase marketed principally for use as sunscreen used in the Determination, as was given to the phrase marketed principally for use as a sunscreen preparation under Item 91 of Schedule 1 to the Sales Tax Act. You drew our attention to the statement in the Therapeutic Goods Administration (TGA) listing that "[t]he sponsor of the listed medicine must not, by any means, intentionally or recklessly advertise the medicine for an indication other than those accepted in relation to the inclusion of the medicine in the Register". We sought clarification on this statement from TGA and were advised as follows. Where the listed product (medicine) is for a particular indication accepted by the TGA in relation to the inclusion of the product (medicine) in the Register, it cannot be advertised for any other medical indication. We accept that, in respect of medicinal properties, you do not advertise the Subject Products for any other medical therapeutic purpose other than that of sun screening. Thus you may satisfy TGA requirements. However, to satisfy the requirements of the Determination, the Subject Products must be marketed principally for use as sunscreens. The term "marketed principally" is not defined in the GST Act. It therefore takes the ordinary meaning of what would be commonly understood as "marketed principally". The Macquarie Dictionary defines "principally", in the context it is used here, as "first or highest in rank, importance, value, etc; chief; foremost." Thus, for the Subject Products to be GST-free as per the Determination, they must be marketed chiefly and foremost, and in importance and rank, and in value, for use as sunscreen products. | Detailed Reasoning - Product name: The name of the Subject Products indicates that the products provide a shield against UV rays and has a sun protection factor of 30+. However, the names of the Subject Products do not contain the word sunscreen. Whilst not conclusive, this does suggest that the products are something other than sunscreens. | Detailed Reasoning - Labelling and packaging: On the product labels, the descriptions read as "protective daily moisturiser" and further qualified with specific words. Then, in a smaller print it states, in one of the Subject Products for example, "Very high protection sunscreen Broad Spectrum UVA, UVB with moisture boost complex Fights the visible signs of premature skin ageing Fast-absorbing, non whitening". The wordings in the other Subject Products are similar. The cartons on which the Subject Products are packed have same wording. Based on the above, it is our view that the labelling and packaging of the Subject Products suggest that they are primarily daily moisturisers which also contain other ingredients which block UVA and UVB rays and reduce sun damage, dehydration and environmental stress on the skin. | Detailed Reasoning - Advertising and consumer information: Certain aspects of the advertising and consumer information about the Subject Products suggest that the products are being marketed to be used primarily for protection. However, it is also clear that the protection referred to in this material is not only protection from sun damage, but also protection from dehydration and environmental stress. The consistent reference to the Subject Products as moisturisers, suggests that first and foremost, the products are moisturisers whose protective ability are enhanced by the inclusion of extra ingredients, such as sunscreens and antioxidants, which provide further protection against sun damage, dehydration and environmental stress to the skin. | Detailed Reasoning - Retail outlets and product location: You informed us that the Subject Products can only be purchased from retailers ranging from traditional department stores, beauty therapists and day spas to cosmetic physicians. At department stores the Subject Products would be placed with the rest of the company's range in the cosmetic and beauty care section. You advise that the Subject Products would not be found with sunscreens in supermarkets and other similar retail outlets. This indicates that, in ordinary circumstances, a consumer of sunscreens will not be looking for sunscreens where they are presently retailed. This again suggests that the Subject Products are not being marketed in the same way as other sunscreens because they are intended to be used as something other than sunscreens, namely, as daily moisturisers with the added benefit of sun protection. | Detailed Reasoning - Conclusion: Based on the information you have provided, it is considered that the Subject Products are not marketed principally for use as sunscreens. We are of the view that they are, instead, marketed for use as daily moisturisers which also contain sunscreen. Accordingly, the supply of the Subject Products will not be GST-free; they will be subject to GST where the provisions of section 9-5 of the GST Act are satisfied.