Indonesia: Guidance on categories of non-VAT-able goods and services
Regulation specifies three circumstances when VAT is not due/collected
Regulation specifies three circumstances when VAT is not due/collected
The government in December 2022 issued three additional implementing regulations of the reformed value added tax (VAT) law. Read TaxNewsFlash
One of the implementing regulations—Government Regulation No. 49 Year 2022—provides guidance on the categories and classifications for non-VAT-able goods and services. The regulation specifies three circumstances when VAT is not due/collected:
- VAT is not due for specific non-VAT-able goods and services
- VAT is exempt for certain VAT-able goods and services and strategic VAT-able goods and services
- VAT is not collected for certain VAT-able goods and services and strategic VAT-able goods and services
Input VAT that occurs with respect to the sale of non-VAT-able goods and services or with respect to the sale of goods and services that are exempt from VAT are not creditable under the common output/input VAT credit mechanism. However, input VAT that occurs with respect to the sale of VAT-able goods/services subject to VAT-not-collected is creditable.
The regulation changed the categorization of health, social, financial and insurance, education, public transportation, and outsourcing services. These were previously put in the non-VAT-able services category (in the former implementing regulations) but are now strategic VAT-able services that are VAT-exempt. Thus, VAT entrepreneurs selling this category of VAT-able services may be required to issue and administer VAT invoices.
KPMG observation
In general, the changes in the categorization of VAT-able and non-VAT-able goods and services do not modify the VAT payable calculation. However, taxpayers must carefully pay attention to whether this change affects the administration of their VAT obligations (i.e., the administration of their VAT invoice, tax exempt certification, and VAT reporting).
Read a March 2023 report [PDF 420 KB] prepared by the KPMG member firm in Indonesia
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