VAT to 12 Percent, Food and Beverage Entrepreneurs: Production Costs Potentially Increase

Chairman of Gapmmi Adhi Lukman (doc. voi)

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

According to Adhi, the policy of increasing VAT to 12 percent will have an impact on the increase in the price of services/products, thus weakening people's purchasing power, and sales utilities will not be optimal.

"Especially for food products that are very sensitive to price, people will curb their consumption. This will slow down the rate of household consumption," said Adhi in his statement, Monday, November 25.

In addition, Adhi said that household consumption, which is the mainstay of economic growth, contributed 53.08 percent to national GDP, showing a weakening trend.

Meanwhile, in Q3-2024, consumption was only able to grow 4.91 percent, lower than Q2-2024 of 4.93 percent.

Adhi said that the food and beverage industry is the driving force of transactions in various retail players, both in traditional and modern markets.

"Increasing turnover and money circulation 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 revenue.

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

Therefore, Adhi said that his party hopes that the government will choose other steps to increase state revenues, such as implementing VAT extension which still has great potential, rather than increasing rates.

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