Indonesia Plans to Complete the Unclear Regulations on Agricultural VAT
Indonesian Farmer Planting Rice in the Fields - Photo: Special

JAKARTA (TheInsiderStories) – The government plans to discuss the impact of policies related to the discourse on the elimination of Value Added Tax (VAT) of agricultural products. Its hoped that these provisions will not burden farmers and industries that utilize agricultural products, so it still have fair and equitable economic competitiveness.

“We are still trying to explore the impact and so on, like what the impact is to farmers, as well as the right time. Because of that we are constantly trying to find the best solution,” said the Head of State Revenue Policy Center of Ministry of Finance Fofal Rofyanto Kurniawan in Jakarta, on Tuesday (02/19).

He explained that currently his party was discussing important matters that would be included in the rules, for example related to the types of agricultural commodities that would be regulated in the policy.

“What kind of definitions must be made about agricultural products, what kind of policy will be, then, we still want to close it, deepen it before we publish the regulation,” he said.

The government will also pay attention to the decision of the Supreme Court which has canceled a number of articles in Government Regulation Number 31 Year 2007 which stipulate agricultural products produced from agricultural, plantation and forestry businesses, animal husbandry, hunting or capture, or captivity, and fisheries either from fishing or cultivation. While from the plantation, the VAT released is oil palm.

However, it has not been confirmed regarding the level of effectiveness of the regulation and when exactly the tax rules will be completed and issued. Until now, there has been no decision whether agricultural VAT will be deleted or not. He acknowledged that further discussion was still needed with the Coordinating Ministry for Economic Affairs (CMEA).

In late December, the CMEA Darmin Nasution said that the Supreme Court’ ruling was only beneficial for fresh fruit bunch farmers. Because, farmers can made input tax refunds.

While for other farmers who are not processed in the form of seeds or in fresh form, the decision is burdensome. This was what currently concerns the government.

However, Nasution was reluctant to disclose any alternatives that had been announced by the government because they still had to conduct discussions with the Minister of Law and Human Rights.

Previously, the Directorate General of Tax of the Ministry of Finance has processed and reviewed the service sector for which export can be given exemption from VAT or zero percent tariff and ensuring that 10 percent VAT will not apply to farmers who have a turnover below Rp 4.8 billion per year.

But, the Indonesian People’ Sugar Cane Farmers Association objected to the imposition of 10 percent VAT which would be applied to agricultural and plantation commodities, including sugar as the result of the Supreme Court’s decision.

Written by Daniel Deha, Email: