The Indonesian Logistics and Forwarders Association (ALFI) has voiced its appreciation for the Indonesian government’s recent decision to impose a 12% Value Added Tax (VAT) solely on luxury goods and services. Meanwhile, non-luxury goods and services will remain subject to the previous VAT rate of 11%.
This policy, announced on December 31, 2024, has been welcomed by various sectors, including ALFI. The association’s Advisory Board Chairman, Yukki Nugarahawan Hanafi, and General Chairperson, Akbar Johan, have both expressed their support for the policy.
The government, under President Prabowo Subianto and Minister of Finance Sri Mulyani Indrawati, clarified that the VAT increase from 11% to 12% would apply exclusively to luxury goods and services. Non-luxury items will continue to be taxed at the existing rate, which has been in place since 2022.
ALFI, representing logistics and forwarding businesses, views this decision as crucial for sustaining the nation’s economic growth. Yukki Nugarahawan Hanafi emphasized that the policy is designed to protect the purchasing power of the middle class while enhancing the competitiveness of Indonesia’s industrial sector.
“The application of the 12% VAT exclusively to luxury goods, as outlined in PMK Number 131 of 2024, is expected to help preserve the purchasing power of the middle class and contribute to sustainable economic growth,” Yukki explained.
He also appreciated the government’s provision of a transition period, which allows businesses time to adjust to the new VAT regulations. Entrepreneurs who have already implemented the 12% VAT can return the 1% excess tax to consumers, in accordance with the upcoming implementing regulations.
Minimizing the Impact on the Logistics Sector
Akbar Johan, ALFI’s General Chairperson, emphasized the positive impact of this policy on businesses, particularly within the logistics and forwarding sectors. By maintaining the 11% VAT rate for non-luxury goods and services, businesses in logistics will not face a significant tax burden.
“We applaud this decision. By keeping the previous VAT rate for non-luxury goods and services, logistics and forwarding companies will not incur additional costs, allowing the sector to continue its growth trajectory,” Akbar stated.
He further explained that many shipping service providers include VAT in their rates, and with no change in the VAT rate, consumers of shipping services will not bear additional costs. “Ultimately, it is the consumer who absorbs the cost,” Akbar added.
The Indonesian Chamber of Commerce and Industry (KADIN Indonesia) has also expressed strong support for the new policy. Prior to the announcement, KADIN had provided input to the government, highlighting the need for a careful review of the proposed VAT increase. This consultation involved various associations, including ALFI.
Arsjad Rasjid, General Chairperson of KADIN Indonesia, noted that the policy would contribute to strengthening national economic growth, particularly by safeguarding the purchasing power of the middle class.
“KADIN Indonesia, in collaboration with industry associations, stands ready to work with the government to ensure the effective implementation of tax policies that will support the economy and foster stable industrial growth,” Arsjad stated.
The overarching goal of this policy is to promote inclusive economic growth in Indonesia by balancing the protection of middle-class purchasing power with efforts to enhance state revenue through progressive taxation.