DIGIVESTASI - 12% VAT Increase: Focus on Luxury Goods, Government Finalizes Regulation, The public is awaiting clarity on the upcoming increase in Value-Added Tax (VAT) from 11% to 12%, set to take effect on January 1, 2025. The government has committed to prioritizing fairness in implementing this policy. Here are the latest developments:

12% VAT Only for Luxury Goods

On Friday (December 6, 2024), President Prabowo Subianto confirmed that the VAT increase would apply only to luxury goods and services. The decision followed discussions with DPR leadership.

“VAT is mandated by law, but it will be applied selectively to luxury goods. Low-income citizens will continue to be protected from the impact of the VAT hike,” Prabowo said during a press briefing at the Merdeka Palace.

Prabowo emphasized that the government has been shielding low-income groups since 2023 by exempting basic goods from VAT. The final list of items subject to the 12% VAT rate awaits a Government Regulation as a legal framework.

Regulation Targeted for Release Next Week

Finance Minister Sri Mulyani Indrawati stated on Wednesday (December 11, 2024) that the technical details of the VAT increase would be announced by next week.

She explained that basic necessities, education services, healthcare, public transportation, and essential household needs such as electricity, water, and vaccinations will remain VAT-exempt. “We will implement Law No. 7/2021 on Tax Regulation Harmonization (HPP) while maintaining fairness,” said Sri Mulyani.

The proposed VAT increase on luxury goods also includes items currently classified under the Luxury Goods Sales Tax (PPnBM) category.

Ongoing Finalization of the Luxury Goods List

Coordinating Minister for Economic Affairs Airlangga Hartarto revealed on Thursday (December 12, 2024) that the list of luxury goods subject to the 12% VAT rate is still being finalized. "Discussions are ongoing. We have yet to receive the list from the Ministry of Finance," Airlangga noted.

He did not rule out the possibility of a phased announcement, including potential incentives such as Government-Borne VAT (DTP) for housing and adjustments to PPnBM in the automotive sector.

President Convenes Meeting with Key Ministers

President Prabowo Subianto held a limited cabinet meeting on VAT policy at the Presidential Palace on Friday (December 13, 2024). Key attendees included Finance Minister Sri Mulyani, Coordinating Minister for Economic Affairs Airlangga Hartarto, and Deputy Finance Minister Suahasil Nazara.

Airlangga confirmed that the Ministry of Finance is still drafting the Ministerial Regulation (PMK) governing the VAT increase. "We are discussing it first before finalizing the PMK," he told reporters.

By applying the 12% VAT rate to luxury goods, the government aims to balance fairness and meet fiscal needs without imposing undue burdens on vulnerable groups.

Find more news and articles on Google News