Private ruling: GST and supply of X as GST-free supply.
Date of advice: 22 May 2018
Published: July 2018
Ruling period: Not applicable
Date scheme commenced: Not applicable

Ruling: Q1: Is the supply of X, a lubricant intended to make it easier to swallow tablets, capsules and powder, GST-free under item 3 of Schedule 1 of GST-free Supply (Health Goods) Determination 2011 ? | A1: No.

Relevant facts and circumstances: You are a private company that sells medical equipment to hospitals, pharmacy and aged care. You are registered for goods and services tax (GST). You sell a product called “X” which is a medication lubricant designed to assist patients in the taking of tablets and medications, by making it easier for them to swallow. X has been sold extensively in nursing homes in Australia proving very beneficial for elderly patients. The manufacturer’s description of the product states that X is a slippery gel consisting of food based ingredients that have no known interactions with medications. The ingredients also break down almost immediately once the medication contacts the acidic environment of the stomach, thus having minimal impact on absorption of the medication. X has been listed in the Australian Register of Therapeutic Goods (ARTG). X has been described in ARTG as a universal gel that is intended to make it easier to swallow tablets, capsules and powders. The manufacturer of X has confirmed that at present time, there is no indication that one or more ingredients in X deteriorate rubber or latex. You advised us that the manufacturer has not confirmed that the X can be used with condoms. You advised that the product X would be best described under Item 3 of Schedule 1 of the GST-free Supply (Health Goods) Determination 2011 which lists “personal and surgical lubricants that (a) are water-soluble; and (b) are suitable for use with condoms”.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 – subsection 38-47(1)

Reasons for decision: Summary: Under subsection 38-47(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) a supply of goods is GST-free if determined as such, in writing, by the Health Minister. For the purposes of subsection 38-47(1) of the GST Act the Health Minister has made GST-free Supply (Health Goods) Determination 2011 . Under this determination, personal and surgical lubricants that: (a) are water-soluble; and (b) are suitable for use with condoms; and (c) under the Therapeutic Goods Act 1989 the goods are required to be included in the Australian Register of Therapeutic Goods, or are goods in a class of goods required to be included in the Australian Register of Therapeutic Goods are GST-free. The product X has been listed in the Australian Register of Therapeutic Goods (ARTG) as a universal gel that is intended to make it easier to swallow tablets, capsules and powders. The intended purpose of this product is to assist people with difficulties in swallowing medications such as tablets and capsules. This product is listed in the ARTG as “Lubricant”. However, it is not confirmed by the manufacturer that the product is suitable for use with condoms. The ingredients of this product break down almost immediately once the medication contacts the acidic environment of the stomach. You contend that the ingredients of this product break down immediately in the stomach which is the most acidic environment in the body. The environment where a condom would be used is not acidic. X is also not marketed as a product that can be used with condoms. The only confirmation the manufacturer has made is that there is no indication at present that one or more ingredients in X deteriorate rubber or latex. We consider that the confirmation provided by the manufacturer is insufficient to enable us to determine whether this product can be used with condoms and therefore, the supply of this product will be GST-free as per Item 3 of Schedule 1 of the GST-free Supply (Health Goods) Determination 2011 . Based on the facts provided, it is our view that the supply of X will not be GST-free under subsection 38-47(1) of the GST Act for the following reasons: ● the intended purpose for which this product is registered with ARTG is to make it easier to swallow tablets, capsules and powders. ● it was not marketed as a product that can be used with condoms. ● the manufacturer has not confirmed that the X can be used with condoms. The supply of X will be taxable provided the supply satisfies all of the requirements of section 9-5 of the GST Act.