Nabiila Azzahra, Jakarta – The Finance Ministry is currently finalizing the regulations for the 12 percent value-added tax (VAT) that will be implemented starting next year. Finance Minister Sri Mulyani has ensured that this tax will not be imposed on essential goods.

The 12 percent VAT rate increase is scheduled to take effect no later than January 1, 2025, as mandated by Article 7 Paragraph (1) of Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP).

The government's decision to proceed with the 12 percent VAT increase amid concerns about a weakening economy has drawn public criticism. In response, President Prabowo Subianto announced that the 12 percent VAT would be applied selectively, specifically to luxury goods. He instructed the Finance Ministry to compile a comprehensive list of these luxury goods.

Sri emphasized that the government is striving to maintain a balanced fiscal policy while upholding the principles of justice as outlined in the HPP Law. Further details regarding the 12 percent VAT implementation, including the list of applicable goods and services, will be jointly announced by the Ministry of Finance and the Coordinating Ministry for Economic Affairs.

"The finalization process is underway. We will soon jointly announce the complete package, including all aspects of the 12 percent VAT implementation, with the Coordinating Ministry for Economic Affairs," she stated during the APBN KiTA December Edition press conference held at the Ministry of Finance office on Wednesday, December 11, 2024.

She explained that numerous essential goods, including rice, meat, fish, eggs, and vegetables, as well as essential services such as public transportation, vaccinations, and others, are currently exempt from VAT under the existing 11 percent rate, which has been in effect since April 1, 2022. "These items are currently subject to 0% VAT," she underlined.

For the current year, the estimated total value of goods and services exempt from the 11 percent VAT is projected to reach Rp231 trillion.

This exemption policy will continue to be applied under the 12 percent VAT rate. Sri Mulyani assured that essential goods and services will remain exempt from the increased tax rate.

"We estimate that the value of VAT exemptions will reach Rp265.6 trillion next year," she said. The former Managing Director of the World Bank emphasized that goods and services that were not subject to VAT in the previous year will continue to be exempt from the upcoming 12 percent VAT. Consequently, the 12 percent VAT rate will be applied exclusively to goods and services deemed "luxury" and "consumed by those who can afford it".

Source: https://en.tempo.co/read/1951802/sri-mulyani-assures-basic-necessities-exempted-from-12-va