VAT Increases by 12 Percent, Check Out 7 Tips and Check the List of Items

At the end of 2024, the Indonesian people again received unpleasant news. The government officially announced a policy related to the 12 percent VAT increase which will take effect in 2025.

Even though it has been stated that this increase will prioritize the principle of justice, this has been responded to by various groups of society in Indonesia, including entrepreneurs. Practically, with an increase in VAT, there will be additional burdens received by businesses in their operations.

Goods Subject to a 12 Percent VAT Increase

Before looking at the impact on business, maybe it would be better if you also know what goods will be affected by this 12 percent VAT increase. If you refer to the Bab IV Pasal 4A UU No.7 2021 about “UU HPP”, it is stated that food and drinks served in hotels, restaurants, eateries, stalls, and food provided by catering are not subject to VAT.

Other goods that also do not experience an increase in tax are basic goods such as rice, corn, sago, salt, meat, eggs, milk, fruit, and vegetables. Then there are also transactions in money, gold bullion and securities on the financial market.

So, what goods will be subject to 12 percent VAT?

The list is quite detailed, starting from clothes, shoes, electronic equipment, toiletries and house cleaning supplies, over-the-counter medicines, to various types of cosmetics. Basically, items not mentioned in the exceptions in the previous section.

When will the 12 percent VAT increase come into effect in Indonesia?

If you look at what the Minister of Finance Sri Mulyani said some time ago, the 12 percent VAT increase will come into effect on January 1, 2025. It was also conveyed that when the new VAT regulations are implemented, necessities will still have a VAT rate of 0%.

However, as of the time this article was written on December 13, 2024, no official details could be provided regarding the formulation of the implementation of the new VAT rules. It is very possible that in the remaining days of December 2024, the government will continue to formulate its rules and regulations, so that when they come into force in early 2025, all technical matters can be implemented properly.

The formulation process will largely revolve around the classification of goods and services that will be subject to the new VAT increase. This considers the principles of justice previously mentioned, so it is likely that the goods and services affected by the new 12 percent VAT rule will be goods and services in the luxury category.

On the other hand, when the meeting with members of the DPR took place and discussed this regulation, the opinion emerged that the government could make the regulations properly so as not to give businessmen room or opportunity to cheat to cheat their goods or products in order to get VAT at the old rate, 11 percent.

A Glance at How to Calculate VAT with the New Regulations

So that you have a clearer picture of how this regulation applies and how to calculate it, you can look at the scheme below.

Basically, calculating VAT at the new rate is quite simple. The formula used is

= Selling Price x VAT Rate

= Amount of PPN

To illustrate, for example, if you buy a product for IDR 10,000,000, the amount of VAT that must be paid is as follows.

= Selling Price x VAT Rate

= Rp. 10,000,000 x 12%

= Rp. 1,200,000

So, the total price that must be paid is the selling price + VAT amount.

= RP. 10,000,000 + IDR 1,200,000

= Rp. 11,200,000

It looks quite simply, but many people predict that the impact will not be as simple as the calculation above. Many businesspeople are worried about this, because whether directly or indirectly the increase in VAT will have an impact on the costs and prices of the products sold.

Tips for Responding to a 12 Percent VAT Increase for Businesspeople

As an entrepreneur, you must prepare yourself to face the changes that will occur soon. Whether directly or indirectly, the impact of the 12 percent VAT increase will be felt sooner or later.

Some tips that can be shared in dealing with this change include the following.

1. Price Adjustments

New pricing strategies must begin to be formulated so that the products you sell can remain competitive in the market. There is no need to doubt, this impact will be felt by all industry players, so that changes in the pricing strategy that you implement will also definitely be made by competitors.

Calculate it carefully, and balance it with offering other benefits for your loyal customers without having to add burden to the business.

2. Consult a Tax Expert

To design a new strategy to face this VAT increase, don't hesitate to consult a tax expert. Analysis from experts may be needed so that you can respond to the changes that occur wisely so that the business can survive or even develop in welcoming new conditions.

3. Increase Business Competitiveness

Increasing competitiveness needs to be done so that more customers make purchases and choose your product. Competition will clearly get tougher, that's why you need fresh ideas that can attract customers to continue making repeat purchases.

Providing special discounts to loyal customers could be an attractive option or offering product sales packages at more economical prices.

4. Ensure Optimal Operations and Management

These two components play a crucial role in business. However, you may need to look at it again, and ensure that all operational and management processes are running optimally.

This means that no resources are wasted, and every effort expended in the form of energy or costs must have commensurate gains according to the calculated ratio.

5. Recalculate Production Costs

A small or large increase in VAT will affect the amount of production costs required. Do a recalculation and make sure all visible production variables have clear numbers, so you can know for sure the production costs required by the implementation of this new rule.

6. Product Diversification

Even though it sounds like something that is challenging, in fact diversifying products can help customers get more diverse options, both in terms of type and price. If developed and marketed well, increasingly diverse products can reach a wider market, and generate higher purchases.

7. Use Reliable Business Insurance

The right business Insurance is an important variable to ensure that the company does not experience 'deadly' losses when undesirable things happen. This insurance itself can provide benefits and protection for you as a business owner, to avoid major losses due to one reason or another stated in the policy.

The implementation of 12 percent VAT has a big impact on the world of business and industry. But responding wisely will make all the difference you need. If you can carry out sharp analysis and apply the right strategy, the impact of this tax increase can be managed well so that it doesn’t have a too bad impact on your business.

Regarding the latest regulations regarding 12 percent VAT, you are also advised to have reliable business insurance. PT AXA Insurance Indonesia offers its flagship product in this sector, namely SmartBusiness Insurance. This insurance will provide a lot of protection and benefits, resulting from inconvenience due to cessation or closure of business premises, coverage for death or permanent disability due to work, and prolonged illness experienced by employees. With insurance from PT AXA Insurance Indonesia, you can run your business more calmly, and focus on your efforts to continue to survive and develop your business to the point you want!

Reference:

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