Hello, is there anything we can help?
Jakarta, Ideatax -- The Central Bureau of Statistics (2023) reported that there was a rise in the Gross Domestic Product of the tobacco processing industry during the third quarter of 2023. In that quarter, the value of the Gross Domestic Product of the tobacco processing industry was estimated at IDR 22.87 trillion. This value increased by 13% compared to the previous quarter.
Based on cigarette production data, the increase in market demand triggered an increase in Gross Domestic Product in the processed tobacco industry sector. The government has raised the average excise tax on cigarettes by 10% which increases the price of cigarettes (CNBC, 2023).
The provisions regarding the increase in excise tax on tobacco products are regulated in Minister of Finance Regulation Number 192/PMK.011/2022 concerning Amendments to PMK Number 193/PMK.010/2021 concerning Excise Tariffs on Tobacco Products in the form of Electronic Cigarettes and Other Tobacco Processing Products. Through this regulation, the Government increased the average excise tax on cigarettes by 10% and hand-rolled clove cigarettes by 5%. The increase in excise tax on tobacco products is conducted to support the reduction of smoking prevalence in children (CNBC, 2022).
In addition to issuing provisions regarding the increase in excise tax on tobacco products, in 2022 the Government also issued regulations regarding VAT on processed tobacco products. Through Minister of Finance Regulation No. 63 Year 2022 on Value Added Tax on Delivery of Tobacco Products, the Government regulates that the delivery of tobacco made domestically by producers, or tobacco products made abroad by importers is subject to Value Added Tax.
Value Added Tax on the delivery of tobacco products is calculated by multiplying the VAT rate by the tax base. The VAT rate imposed is 11% effective from April 1, 2022, and 12% effective no later than 2025, as stipulated in the Law on Harmonization of Tax Regulations. The tax base on the delivery of tobacco products is in the form of other values calculated by the formula 
multiplied by the retail price of tobacco products where t as referred to in the formula is a VAT tariff of 11% or 12%.
Based on the formulation of other values in the above calculation, the effective rate of VAT on the delivery of tobacco products is 9.9% multiplied by the retail price of tobacco for the delivery of tobacco products starting April 1, 2022 and an effective rate of 10.7% on the delivery of tobacco products after the determination of the VAT rate in accordance with Article 7 of the HPP Law.
It is important to note that VAT on the delivery of tobacco products (as stipulated above) is only collected once by the manufacturer or importer. Thus, for the delivery of tobacco products that have been collected VAT by producers or importers, distributing entrepreneurs are not required to collect and deposit VAT.
Unlike the prevalence of VAT using other value DPPs in general, input tax on the acquisition of Taxable Goods and/or Taxable Services, or import of Taxable Goods and Services, utilization of intangible Taxable Goods from the customs area in connection with the delivery of tobacco products, can be credited by the producer or importer. Thus, it is likely that producers or importers who deliver tobacco products will experience VAT overpayments. This is an advantage for producers or importers of tobacco products because it can save cash flow.
Thus, to avoid the jealousy of other business actors, the government needs to mitigate risks by providing an explanation and background as to why input tax on the acquisition of taxable goods and services, import of taxable goods and services, or utilization of intangible taxable goods from outside the customs area for the delivery of tobacco products by producers and importers can be credited.
References
BPS. (2023, November 15). [Seri 2010] PDB Seri 2010 (Milyar Rupiah), 2023. Retrieved from Badan Pusat Statistik: https://www.bps.go.id/indicator/11/65/1/-seri-2010-pdb-seri-2010.html
CNBC. (2022, Desember 19). Sri Mulyani Rilis Aturan: Harga Rokok Naik 12% di 2023 & 2024. Retrieved from CNBC: https://www.cnbcindonesia.com/news/20221219085728-4-398006/sri-mulyani-rilis-aturan-harga-rokok-naik-12-di-2023-2024
CNBC. (2023, April 13). Produksi Rokok Meroket Hampir 100%! Ada Apa Nih? Retrieved from cnbc: https://www.cnbcindonesia.com/market/20220413095018-17-331231/produksi-rokok-meroket-hampir-100-ada-apa-nih
