Non-collected and Exempted VAT: What's the Difference?
Jakarta, Ideatax -- The Ministry of Finance (2022) reported that there was an increase in tax expenditure from 2018 to 2021. In 2021, the total tax expenditure incurred by the government reached IDR 299.1 trillion or an increase of 23.8% from the previous year (Ministry of Finance, 2022). The Ministry of Finance said that the increase in tax expenditure was due to an increase in economic activity after the COVID-19 pandemic which had implications for increasing the utilization of tax incentives (Ministry of Finance, 2022).
Tax expenditure itself is defined as a transfer of resources to the public but not in the form of aid or direct spending (direct transfer) but through a reduction in tax liabilities that refer to applicable tax provisions (OECD, 2010). The Ministry of Finance (2022) stated that tax expenditure is a form of government support for the investment climate and economic sector in Indonesia.
There are various kinds of government tax expenditures to encourage the economy and investment, one of which is the VAT exemption and VAT not collected facility. In the 2021 tax expenditure report, the Ministry of Finance said that there are eight types of tax expenditure on VAT not collected and ten types of tax expenditure on VAT exempted. Then, what is the difference between VAT not collected and VAT exempted? Through this article, we will discuss the two VAT facilities.
Non-collected and exempted VAT
The provisions on non-collected and exempted VAT are basically regulated in the VAT Law. Article 16B of the VAT Law regulates that the tax payable is not collected in part or in full or exempted from the imposition of tax for:
Activities in certain areas or certain places within the customs area;
Delivery of certain taxable goods or delivery of certain taxable services;
Import of certain taxable goods;
Utilization of certain intangible taxable goods from outside the customs area within the customs area; and
Utilization of certain JKP from outside the customs area within the customs area.
Although the provisions regarding non-collected and exempted VAT are regulated in the body of the VAT Law, the Law does not clearly state what activities obtain non-collected VAT facilities and what activities obtain exempted VAT facilities.
The VAT Law only explains that for the acquisition of taxable goods or services whose delivery obtains a non-collected VAT facility, the input tax on the acquisition of the taxable goods or services can be credited. On the other hand, for the acquisition of taxable goods or services whose delivery is exempted, the input tax on the acquisition cannot be credited.
At first glance, the two facilities appear to be the same, but they have different consequences. For example, on the delivery of Taxable Goods A worth IDR 100,000; the VAT facility is not collected. The input tax on the acquisition of goods A is IDR 7,000. Because the delivery gets the facility of non-collected VAT, the input tax on the acquisition of goods A amounting to Rp 7,000 can be credited.
On the delivery of Taxable Goods B worth IDR 100,000; the VAT facility is exempted. The input tax on the acquisition of goods B also amounts to Rp 7,000. Due to the exemption of VAT facility on the delivery, the input tax of 7,000 cannot be credited. The illustration can be seen in the following table:
Based on the table above, it can be seen that with the same number of deliveries and input taxes, it will result in different payable VAT on non-collected VAT facilities and exempted VAT facilities.
Sinaga (2013) argues that the non-collected VAT facility is generally suitable for activities that are considered to have a national priority scale and for goods or services that are a necessity of life for many people but are at the end of the production and distribution chain. Meanwhile, the exempted VAT facility is generally appropriate for consumption goods that are needed for national interests but have not been able to be produced domestically.
Another opinion found that non-collected VAT facilities are generally given to deliveries related to certain economic zones such as bonded zones, free zones, certain economic development zones (KAPET), ease of import for export (KITE) and related to the import or delivery of transportation equipment in the field of Defense and Security, Indonesian Army (TNI) and Indonesian National Police (POLRI).
Examples of non-collected VAT facilities along with tax expenditures issued by the government can be seen in the following table (in billion rupiah):
Source: Ministry of Finance (2022)
On the other hand, deliveries that receive VAT exemption facilities are given to PKPs that make strategic deliveries of Taxable Goods, certain BKP/JKP, deliveries to representatives of foreign countries and international organizations and their officials. The examples can be detailed in the following table (in billion rupiah):
Source: Ministry of Finance (2022)
For the delivery of Taxable Goods and Services (BKP/JKP) that receive non-collected and exempted VAT facilities, the Taxable Person for VAT Purposes is still obliged to make a tax invoice. For deliveries that receive VAT facilities that are not collected, PKP shall issue tax invoices with code 07. On the other hand, for VAT deliveries that receive exempted VAT facilities, PKP shall make invoices with code 08.
Ministry of Finance (2022). Laporan Belanja Perpajakan 2021. Jakarta: Ministry of Finance.
OECD. (2010). Tax Expenditures in OECD Countries . Paris: OECD.
Sinaga, S. T. (2013, September 20). APA PERBEDAAN HAKIKAT FASILITAS PPN TIDAK DIPUNGUT DARI PPN DIBEBASKAN? Retrieved from BPPK Kemenkeu: https://bppk.kemenkeu.go.id/sekretariat-badan/berita/apa-perbedaan-hakikat-fasilitas-ppn-tidak-dipungut-dari-ppn-dibebaskan-553460
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