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The Government Has Officially Increased The Value Added Tax (VAT) To 12 Percent, With The Exception Of Basic Food Items

The government has announced an increase in the value-added tax (VAT) rate from 11 percent to 12 percent, effective January 1, 2025, with the exception of essential food items.

This decision aligns with Law Number 7 of 2024 concerning the Harmonization of Tax Regulations (HPP Law).

The announcement was made by Coordinating Minister for Economic Affairs Airlangga Hartarto, alongside Finance Minister Sri Mulyani and other members of the Red and White Cabinet, during a press conference on the Economic Stimulus Package held at the Ministry of Economic Affairs in Central Jakarta on Monday, December 16.

"In accordance with the mandate of the law on the harmonization of tax regulations, this follows the established schedule. The VAT rate will increase to 12 percent starting January 1 next year," stated Airlangga.

However, he emphasized that the 12 percent VAT rate will not apply to goods essential for the public or vital basic necessities. These essential items will instead be exempt from VAT.

Such items include rice, meat, fish, eggs, vegetables, milk, consumer sugar, educational services, healthcare, public transportation, labor services, financial services, insurance services, polio vaccines, and water usage.

"Goods that are essential for the public will have a VAT rate of 0 percent... all of them will be exempt from VAT. Therefore, we will provide exemptions for certain goods," he added.

To mitigate the impact of the VAT increase, the government will also implement several economic stimulus packages aimed at maintaining public welfare.

Previously, President Prabowo Subianto announced that the VAT would indeed rise to 12 percent next year, but this increase would only target luxury goods.

He indicated that the VAT increase is mandated by Law Number 7 of 2021 regarding the Harmonization of Tax Regulations (HPP).

The 12 percent VAT increase, which is limited to luxury goods, was disclosed by the House of Representatives following a meeting between several House leaders and President Prabowo Subianto.

Chairman of Commission XI of the House of Representatives, Misbakhun, confirmed that the increase will take effect starting January 1, 2025.

Tag: Airlangga Hartarto Prabowo Subianto VAT