VAT To 12 Percent, Mamin Entrepreneurs: Production Costs Potentially Increase

JAKARTA - Chairman of the Association of Indonesian Food and Beverage Producers (Gapmmi) Adhi Lukman asked the government to review the plan to implement the policy of increasing Value Added Tax (VAT) to 12 percent starting January 1, 2025 because the increase in VAT will have a major impact on supply chains, increase in raw materials and production costs.

According to Adhi, the policy of increasing VAT to 12 percent will have an impact on increasing service/product prices, thereby weakening people's purchasing power, and non-optimal sales utilities.

"Especially for food products that are very sensitive to prices, people will put the brakes on consumption. This will slow down household consumption," said Adhi in his statement, Monday, November 25.

In addition, Adhi said that household consumption, which supports economic growth, contributed 53.08 percent to the national GDP, shows a weakening trend.

As for the third quarter of 2024, consumption was only able to grow 4.91 percent, lower than the second quarter of 2024 of 4.93 percent.

Adhi said the food and beverage industry is a driving force for transactions in various retailers, both in traditional and modern markets.

"The increase in turnover and circulation of money through trade transactions from various channels can help increase economic activity and state revenue," he said.

According to Adhi, this strategy is very important to create economic stability while strengthening the contribution of the trade sector to state revenues.

Adhi said the increase in VAT would have the potential to suppress the growth of the food and beverage industry so that it could slow down the recovery of the national economy. Moreover, the Government has launched economic growth to reach 8 percent, needs to be supported by all sectors.

Therefore, Adhi said that he hoped that the government would choose other steps to increase state revenues, such as by implementing VAT content which is still potentially large, compared to increasing tariffs.

"Moreover, it is very possible in Law 7/2021 article 7 paragraph 3 that the Value Added Tax Tariff can be changed to a minimum of 5 percent and a maximum of 15 percent," he concluded.