Commission XI of the DPR RI approved the government's plan to increase the rate of Value Added Tax (VAT) which is currently set at 10%. The VAT increase will be carried out in stages starting next year. This means that with the increase in VAT, starting next year, goods consumed by the public will potentially experience a price increase.
Based on the draft Tax Regulation Harmonization Bill (new name for the KUP Bill) received by CNBC Indonesia, Thursday (30/9/2021), Chapter IV Article 7 explains in detail the latest VAT rates. For 2022, the government of President Joko Widodo (Jokowi) began to increase the VAT rate to 11%. It comes into effect on April 1, 2022. The VAT rate of 11% will be in effect for about two years and then increased again to 12%. The increase in VAT to 12% will take effect on January 1, 2025. Meanwhile, the government also stipulates VAT at 0% or not subject to VAT for exports, namely:
- export of Tangible Taxable Goods;
- export of Intangible Taxable Goods; and
- export of Taxable Services.
For information, the current tax law stipulates that the government can increase the VAT rate with the provisions of a minimum of 5% and a maximum of 15%. Thus, the 11% and 12% VAT increases are still within the range set out in the current regulations. The change in the VAT rate will be regulated by a Government Regulation (PP) after the HPP Bill is later ratified into law in a plenary meeting which is planned to be held next week.
