…for goods and services other than luxury goods, there will be no increase in VAT. The rate will remain the same as it is now, since 2022.Jakarta (ANTARA) - President Prabowo Subianto on Tuesday announced that the increase in the value added tax (VAT) from 11 percent to 12 percent will be effective starting January 1, 2025.
According to the President, the VAT has been increased in stages—it was raised from 10 percent to 11 percent in April 2022 and will again be pushed up from 11 percent to 12 percent in January 2025.
"This gradual increase is intended so it will not have a significant impact on people's purchasing power, inflation, and economic growth," he explained at a press conference at the office of the Ministry of Finance, Jakarta, on Tuesday.
He said that implementation of the 12 percent VAT rate is in line with Law Number 7 of 2021 on the Harmonization of Tax Regulations.
He further emphasized that the increased VAT rate will apply to luxury goods and services.
"For example, private jets. They are classified as luxury goods that are utilized or used by the upper class (society)," he informed.
Cruise ships, yachts, motor yachts, and very luxurious houses will also be subject to the higher VAT rate.
"It means that for goods and services other than luxury goods, there will be no increase in VAT. The rate will remain the same as it is now, since 2022," Prabowo underlined.
Earlier, Finance Minister Sri Mulyani Indrawati explained that the government has prepared a number of incentives under the Economic Stimulus Package, which will follow the implementation of the 12 percent VAT.
The government is continuing to provide VAT-free facilities or zero percent VAT for goods and services that are needed by the general public and affect the lives of many people.
These goods and services include basic necessities such as rice, meat, fish, eggs, vegetables, fresh milk, and sugar for consumption as well as education, health, public transportation, labor, financial, and insurance services.
They further include books, polio vaccines, simple and very simple houses, city-built subsidized low-cost apartments (rusunami), electricity, and drinking water.
For low-income households, the government is providing a stimulus of one percent government-borne VAT for basic necessities and important goods, such as wheat flour, subsidized cooking oil Minyakita, and industrial sugar.
This means the VAT rates for these products will stay at 11 percent.
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Translator: Mentari Dwi Gayati, Yashinta Difa
Editor: Azis Kurmala
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