The President has officially implemented a 12% Value Added Tax (VAT), effective Wednesday, January 1, 2025. The announcement followed an internal meeting on Tuesday evening (December 31, 2024), attended by Finance Minister Sri Mulyani Indrawati and senior officials at the Ministry of Finance (MoF) headquarters in Central Jakarta.
President Prabowo emphasized that the 12% VAT rate applies exclusively to luxury goods. These include specific items and services already subject to Luxury Goods Sales Tax (PPnBM), as detailed in the latest Minister of Finance Regulation (PMK) No. 15 of 2023. These goods are typically consumed by high-income groups.
“To clarify, the VAT increase from 11% to 12% applies only to luxury goods and services,” Prabowo explained, as quoted by ompas.com.
Examples of luxury goods subject to this tax include private jets, yachts, and high-value homes exceeding middle-class standards.
Essential Goods and Premium Products Remain Tax-Free
Prabowo also highlighted that essential goods and premium items are exempt from the VAT increase. These include staples such as rice, meat, fish, eggs, vegetables, and fresh milk, as well as essential services like education, healthcare, public transportation, affordable housing, and drinking water.
Even premium items like high-quality rice, wagyu beef, salmon, premium healthcare, and premium education services remain VAT-exempt under the 0% VAT policy.
“Essential goods and services that are critical for the public will continue to enjoy a 0% VAT rate,” he affirmed.
Finance Minister Sri Mulyani reiterated this point, explaining that premium food products are considered basic necessities and are therefore exempt under the government’s VAT policy.
“Goods and services already benefiting from a 0% VAT exemption will remain untaxed,” she stated.
Positive Reception to VAT Policy
The 12% VAT policy has received positive responses from various sectors. Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE), welcomed the move, noting that it prevents undue pressure on public purchasing power, particularly in the first quarter of 2025.
“The government’s focus should now shift to monitoring the distribution of incentives to maintain public purchasing power,” Yusuf said, as reported by kontan.co.id.
Similarly, Myrdal Gunarto, Economic, Industry, and Global Markets Specialist at Maybank Indonesia, called the selective application of the 12% VAT on luxury goods a wise decision.
“This policy is expected to positively impact economic growth in the first quarter of 2025, especially during Ramadan and Eid celebrations,” Myrdal stated.
He also highlighted the significant role of government investments, particularly in the construction sector, in boosting growth. Myrdal projected Indonesia’s economic growth in Q1 2025 to reach 5.25%.
PLN Offers 50% Discount on Electricity Tariffs
Amid the implementation of the 12% VAT on luxury goods, PT PLN (Persero) has announced a 50% discount on electricity tariffs to benefit households.
This discount applies to households with power capacities between 450 VA and 2,200 VA, covering 81.4 million or 97% of total households. The initiative aims to support the government’s economic stimulus efforts and was shared via PLN’s official Instagram account, @pln_id.
“This program reflects the government’s commitment to safeguarding purchasing power and supporting national economic growth,” the statement read.
The discount is valid for two months, from January to February 2025. It will be applied automatically via PLN’s digital system, so no registration is required.
Sources: kontan.co.id, ompas.com, detik.com
Image credit: Mali Maeder (pexels.com)
