Jakarta, Indonesia Sentinel — Indonesia Coordinating Minister for Economic Affairs, Airlangga Hartarto, announced that while the government will raise the Value-Added Tax (VAT) rate to 12% starting January 1 2025, essential goods and services will remain exempt or subject to a 0% VAT rate.
The announcement was made alongside Finance Minister Sri Mulyani and other cabinet members during a press conference on economic stimulus measures held at the Coordinating Ministry for Economic Affairs in Jakarta on Monday, December 16, as reported by CNN Indonesia.
“In accordance with the Harmonization of Tax Regulations Law and the set schedule, the VAT rate will increase to 12% on January 1 next year. However, essential goods needed by the public will receive a 0% VAT rate,” Airlangga stated.
Exemptions for Essential Goods and Services
Airlangga outlined that essential goods exempt from VAT are specified under Presidential Regulation Number 59 of 2020. These include staples such as rice, meat, fish, eggs, vegetables, milk, and consumer sugar.
The exemptions also extend to critical services such as education, healthcare, public transportation, labor services, financial services, insurance, polio vaccines, and water supply.
List of VAT-Exempt Goods (Perpres No. 59/2020):
- Rice
- Meat (broiler chicken, beef)
- Fish (milkfish, skipjack, tuna, mackerel)
- Eggs (broiler chicken eggs)
- Vegetables
- Fruits
- Milk
- Salt
- Consumer sugar
- Cooking oil (specific types)
- Chili (green, red, cayenne)
- Shallots
List of VAT-Exempt Services (PP No. 49/2024):
- Educational services
- Medical healthcare services
- Social services
- Public transportation
- Financial services
- Low-income housing rental services
Airlangga emphasized that these goods and services would remain unaffected by the tax hike. “These essential goods are subject to a 0% VAT rate to ensure affordability for the public,” he added.
Strategic Goods to Receive Partial VAT Subsidy
The government will also provide partial subsidies for VAT on certain strategic goods. While these items will technically be subject to the new 12% rate, 1% of the VAT will be borne by the government, effectively reducing the rate to 11% for consumers.
Indonesia 12% VAT is Set to Take Effect on January 2025, Implemented For Luxury Goods
Strategic goods receiving this subsidy include Minyakita-branded cooking oil, bulk cooking oil, wheat flour, and industrial sugar.
“For key staples like Minyakita, previously known as bulk oil, the VAT will remain at 11%. Similarly, wheat flour and industrial sugar will not see an increase to 12%,” Airlangga explained.
Luxury Goods to Bear Full VAT Increase
The VAT increase to 12% aligns with Indonesia’s broader fiscal agenda but will primarily target luxury goods. President Prabowo Subianto previously confirmed that the tax hike would not burden basic necessities.
The VAT increase is part of the government’s long-term economic strategy to boost state revenue while protecting low-income and vulnerable populations through exemptions and subsidies.
(Raidi/Agung)
