Introduction
Regulations play a significant role in carrying out tax rights and obligations. This aligns with Article 23, Section 2 of the 1945 State Constitution of the Republic of Indonesia (Undang-Undang Dasar Negara Republik Indonesia Tahun 1945 / UUD), which states that "All taxes for state purposes are based on law". It also complies with Article 1, Sections 1 and 2 of Law of The Republic of Indonesia Number 6 of 1983 Concerning General Provisions and Tax Procedures, as amended by Law of The Republic of Indonesia Number 7 of 2021, which reads: "Tax is a mandatory contribution to the state owed by individuals or entities that are mandatory based on the law...". "Taxpayers are individuals or entities, including taxpayers, withholding agents, and tax collectors who have tax rights and obligations under the provisions of tax laws and regulations". If taxpayers do not comply with applicable laws in fulfilling their tax rights and obligations, they will be subject to sanctions plus any outstanding taxes.
Background
To ensure a sense of justice, provide legal certainty, and simplify tax administration in the implementation of rights and/or fulfillment of tax obligations for taxable entrepreneurs (Pengusaha Kena Pajak / PKP) delivering tobacco products, the Ministry of Finance deemed it necessary to adjust the provisions regarding the tax base for value-added tax (VAT) collection on tobacco product delivery. Previously, the Ministry of Finance issued Minister of Finance Regulation (Peraturan Menteri Keuangan / PMK) Number 174/PMK.03/2015 regarding Procedures for Calculation and Collection of VAT on the Delivery of Tobacco Products, as amended by PMK Number 207/PMK.010/2016 regarding Amendments to PMK Number 174/PMK.03/2015 regarding Procedures for Calculation and Collection of VAT on the Delivery of Tobacco Products. However, the Ministry of Finance found that these regulations did not adequately accommodate the need for adjustments to ensure a sense of justice, provide legal certainty, and simplify tax administration in the implementation of rights and/or fulfillment of tax obligations for PKP delivering tobacco products. Therefore, the Ministry of Finance has issued the latest provisions to replace PMK Number 174/PMK.03/2015 and PMK Number 207/PMK.010/2016, namely PMK Number 63/PMK.03/2022 regarding VAT on the Delivery of Tobacco Products. This regulation will come into effect on April 1, 2022. Upon its implementation, PMK Number 174/PMK.03/2015, as amended by PMK 207/PMK.010/2016, will be revoked and declared invalid.
Definition
PMK Number 63/PMK.03/2022 includes 14 (fourteen) definitions, which is more comprehensive than PMK Number 174/PMK.03/2015, which only provided 8 (eight) definitions. The definition of tobacco products in PMK Number 63/PMK.03/2022 is similar to that in PMK Number 174/PMK.03/2015, with the addition of electronic cigarettes in the former. Other definitions in PMK Number 63/PMK.03/2022 are largely the same as those in PMK Number 174/PMK.03/2015, with no significant differences.
Imposition of VAT
According to Article 2 of PMK Number 63/PMK.03/2022, VAT is imposed on the delivery of tobacco products made domestically by producers or tobacco products made abroad by importers. This provision is consistent with the previous regulation, PMK Number 174/PMK.03/2015.
VAT Rates
Based on PMK Number 63/PMK.03/2022, Article 3 stipulates that VAT imposed on the delivery of tobacco products is calculated by multiplying the VAT rate by the other value as the tax base. The VAT rate referred to is 11% (eleven percent), effective from April 1, 2022, and 12% (twelve percent), which will come into effect when the VAT rate is implemented as regulated in Article 7, Section (1), Point b of the VAT Law. Using these VAT rates and the other values as the tax base, the VAT on the delivery of tobacco products, based on rounding, is calculated as follows: 9.9% (nine point nine percent) multiplied by the retail selling price of tobacco products, effective from April 1, 2022. 10.7% (ten point seven percent) multiplied by the retail selling price of tobacco products, effective when the VAT rates are implemented as regulated in Article 7, Section (1), Point b of the VAT Law.
Tax Collection Mechanism
VAT on the delivery of tobacco products is collected once by the producer or importer. This VAT is payable when the producer and/or importer orders excise stamps. Producers and/or importers who have been classified as PKP are required to issue tax invoices for the delivery of tobacco products subject to VAT. The tax invoice is generated when the producer and/or importer orders excise stamps for tobacco products. The collection and filing of VAT on supplies of tobacco products are regulated in the Director General of Taxes (DGT) Regulation Number PER-4/PJ/2024 regarding the Collection and Filing of VAT on Supplies of Tobacco Products. These provisions will come into effect on April 19, 2024. Based on PER 4/PJ/2024, producers and/or importers who collect VAT on the delivery of tobacco products are required to provide proof of VAT collection when ordering excise stamps for tobacco products. The proof of VAT collection referred to is made using a CK-1 Document. The CK-1 Document is a specific document that serves as an equivalent to a tax invoice. The VAT payable in the CK-1 Document is reported by the producer and/or importer as output tax in the periodic VAT return.
Tobacco Products Delivery by Distributors
Distributor entrepreneurs are classified as PKP if, in addition to delivering tobacco products, they also deliver other taxable goods and/or taxable services and have a total delivery of tobacco products and other taxable goods and/or taxable services surpassing the threshold for small entrepreneurs in accordance with applicable provisions. The delivery of tobacco products is reported in the periodic VAT return as a delivery not subject to VAT.
For the delivery of tobacco products on which VAT has been collected by producers and/or importers, distributors who only deliver tobacco products do not collect and deposit VAT. Consequently, distributor entrepreneurs who only deliver tobacco products do not need to be classified as PKP.
Input Tax Credit
Input tax on the taxable goods and/or taxable services, import of taxable goods, and the utilization of intangible taxable goods and/or taxable services from outside the customs area within the customs area, in connection with the delivery of tobacco products by producers and/or importers, can be credited as long as it meets the provisions for crediting input tax under the tax laws and regulations.
However, input tax on the taxable goods and/or taxable services, import of taxable goods, and the utilization of intangible taxable goods and/or taxable services from outside the customs area within the customs area, in connection with the delivery of tobacco products by distributors, cannot be credited.
Conclusion
With the issuance of PMK Number 63/PMK.03/2022 regarding VAT on the Delivery of Tobacco Products, which comes into effect on April 1, 2022, PMK Number 174/PMK.03/2015, as amended by PMK 207/PMK.010/2016, is revoked and declared invalid.
In substance, there is no fundamental difference between PMK Number 63/PMK.03/2022 and PMK Number 174/PMK.03/2015, as amended by PMK 207/PMK.010/2016.
The provisions regarding the collection and filing of VAT on supplies of tobacco products, as regulated in the DGT Regulation Number PER-4/PJ/2024 regarding the Collection and Filing of VAT on Supplies of Tobacco Products, will only come into effect on the stipulated date, namely April 19, 2024. So before April 19, 2024, the provisions used regarding the Procedures for Calculation and Collection of VAT on the Delivery of Tobacco Products still use the DGT Regulation Number PER-49/PJ/2015 which comes into effect on January 1, 2016, until April 18, 2024.
