Will service tax apply to TCM medicine costs or only treatment fees?

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Service Tax Applies Only to Treatment Fees, Not Medicine Costs for TCM

The service tax on traditional Chinese medicine (TCM) services will be levied exclusively on the treatment fees charged by practitioners and will not extend to the cost of medicines purchased by patients. This policy is not a new imposition by the current administration but has been in effect since 2018, as per existing guidelines. The service tax is applicable to taxable services that exceed an annual threshold of RM500,000.
Existing Policy Since 2018

The application of service tax to TCM services is not a recent development. Deputy Finance Minister Lim Hui Ying clarified that this policy was established in the 2018 guidelines, predating the current government. This classification means that TCM services fall under a taxable category, similar to traditional Malay and Indian medicine, distinguishing them from modern medicine.
Taxable Services vs. Medicine Costs

Crucially, the service tax is specifically imposed on the professional services rendered by TCM practitioners, not on the retail price of the medications dispensed. For instance, if a patient is charged RM100 for a consultation and treatment and an additional RM150 for prescribed medicines, the 6% service tax will only be calculated on the RM100 service fee.
Customs Department's Communication

The Customs Department has reportedly been in communication with TCM practitioners regarding the payment of service tax that dates back to 2018. Letters were issued to various TCM associations, including those representing traditional Malay and Indian medicine practitioners, to address the tax obligations applicable to their services.
Rate Increase and Taxable Categories

The current service tax rate stands at 6%, with a planned increase to 8% scheduled to take effect from March 1, 2024. TCM services are categorized under taxable services that include establishments such as health and wellness centres and massage parlours. The aforementioned threshold for registration and payment of service tax is set at RM500,000 in annual taxable service revenue.

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Will service tax apply to TCM medicine costs or only treatment fees?

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