Roundup Indonesia cancels VAT hike on basic goods

Jakarta: Indonesia began 2025 with an increase in the value added tax (VAT) on luxury goods and services in a bid to boost state revenues to support d...

Jakarta: Indonesia began 2025 with an increase in the value-added tax (VAT) on luxury goods and services in a bid to boost state revenues to support development projects in the Southeast Asian country.

In a sharp contrast to the previously annouced plan, basic goods are exempt from the VAT hike.

Under the new policy, established under a regulation passed by former President Joko Widodo and enacted by current President Prabowo Subianto, the VAT rate has been raised to 12 percent, up from the 11 percent rate that has been in effect since 2022.

At a press conference on Tuesday, President Prabowo announced that the VAT hike would apply solely to luxury goods and services. The categories affected include private jets, cruise ships, yachts, and luxury homes.

"For goods and services used by the general public, VAT remains exempt, applied at a 0-percent rate. These include basic necessities such as rice, meat, fish, eggs, vegetables, fresh milk, educational services, health services, public transportation, non-luxurious housing, and drinking water," said Prabowo.