VAT Adjustment Only for Luxury Goods and Services; Government Strengthens Fair Tax System
JAKARTA – The government has confirmed that the adjustment of the Value Added Tax (VAT) rate of 1 percent will only be applied to luxury goods and services. Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that basic community needs such as rice, meat, fish, eggs, vegetables, milk, sugar, education services, health, public transportation, labor, financial services, polio vaccines, simple houses, and drinking water remain free from VAT rates.
“The 1 percent increase in VAT rates does not apply to goods and services that are basic necessities such as rice, meat, fish, eggs, vegetables, milk, sugar, education services, health services, public transportation services, labor, financial services, polio vaccines, simple houses, and drinking water,” said Airlangga.
Minister of Finance, Sri Mulyani Indrawati explained that this policy only targets luxury goods and services consumed by high-income groups.
“The 1% VAT rate adjustment only targets premium goods and services, such as premium rice, premium fruits, premium meat (wagyu, kobe beef), expensive fish (premium salmon, premium tuna), premium shrimp and crustaceans (such as king crab),” said Sri Mulyani.
She also added, “For example, food consumed by the richest group, namely decile 9-10, we will impose VAT. For example, premium beef, wagyu-kobe, which can cost more than IDR 2-3 million per kilogram. Meanwhile, meat enjoyed by the general public is around IDR 150,000-IDR 200,000 per kilogram, it is not subject to VAT,” Sri Mulyani continued.
The General Chairperson of the Indonesian Tax Consultants Association (IKPI), Vaudy Starworld, welcomed the government’s strategic steps to create a fairer taxation system.
“The policy of increasing Value Added Tax (VAT) is a strategic step to strengthen a fair taxation system and support national independence,” said Vaudy.
He also added, “Through a transparent approach and intensive communication, this policy is expected to create a fairer business climate, increase state revenues, and encourage inclusive and sustainable economic development.”
From the energy sector, President Director of PT PLN Darmawan Prasodjo ensured that the 12 percent VAT only applies to household customers with power above 6,600 VA, which includes around 400 thousand customers from the richest group. “The 12% VAT for electricity tariffs is imposed only on 400 thousand household customers with power above 6,600 VA or the richest customers from the decile in our customer structure. Meanwhile, customers with power of 450-2,200 VA get a 50% electricity discount,” said Darmawan.
With policies focused on the upper class, the government is optimistic that the implementation of the new VAT rate will support development without burdening the basic needs of the general public. This step is expected to strengthen national economic independence in a sustainable manner.
