Arnoldus Kristianus, Jakarta – The government is reducing the Value-Added Tax (VAT) on economy-class domestic flights to ease travel costs ahead of the Eid al-Fitr holiday. Under a new regulation, passengers will pay only 5 percent VAT instead of the standard 11 percent, as the remaining 6 percent is covered by the government.

The policy is outlined in Finance Minister Regulation No. 18 of 2025, which takes effect on March 1. The fiscal stimulus aims to support economic growth and assist travelers during the Ramadan and Eid holiday season.

"To boost economic growth and help the public meet their travel needs for Eid homecoming, the government is providing a VAT incentive for scheduled domestic economy-class flights in the 2025 fiscal year," according to an official document received on Friday.

Under Article 2 of the regulation, VAT for economy-class scheduled domestic flights will be split, with passengers covering 5 percent and the government subsidizing the remaining 6 percent. The tax reduction applies to base fares, fuel surcharges, and other taxable service fees charged by airline operators.

The VAT incentive is available for tickets purchased between March 1 and April 7, 2025, and applies to flights scheduled from March 24 to April 7, 2025.

On top of the VAT incentive, the government recently announced a 10 percent discount on airplane tickets for the 2025 Eid al-Fitr homecoming period. Last Christmas, Indonesians also received a 10% discount on domestic flights.

Ramadan marks one of the busiest travel seasons in Indonesia, as millions of people return to their hometowns in a tradition known as mudik. Airlines typically experience a surge in ticket demand, and travel costs often rise due to increased passenger volume. By introducing the VAT reduction, the government aims to make air travel more affordable for the public while supporting the aviation industry.

A survey conducted by the Transportation Ministry revealed that an estimated 193.6 million people, equivalent to approximately 71.7 percent of Indonesia's population, embarked on the Eid exodus last year. This marked a significant 56.4 percent increase from the 123.8 million travelers recorded in 2023.

However, the number of travelers this year may decline due to weakening purchasing power. The National Police (Polri) estimates that over 100 million people will participate in the exodus journey during the peak travel period from March 28 to March 30, 2025.

Source: https://jakartaglobe.id/lifestyle/govt-cuts-vat-on-economyclass-airfare-to-ease-holiday-travel-cost