2025 VAT Exemption Incentive Reaches Rp265 Trillion: Details Inside

The government has set a tax incentive in the form of a Value Added Tax (VAT) exemption of Rp265.6 trillion in 2025.

This incentive is implemented concurrently with the increase in the VAT rate for a number of premium goods/services to 12% starting next year.

Finance Minister Sri Mulyani explained that despite the rate increase, the government will not collect VAT from basic commodities such as meat, eggs, fish, and milk. The same applies to education, health, finance, labor, insurance, and water usage services.

Meanwhile, wheat flour, industrial sugar, and MinyaKita cooking oil will still be subject to a 12% VAT. However, the government will bear the 1% increase difference.

"The government will pay, with an estimated cost of Rp265.6 trillion, so that the public is exempt from VAT on these essential goods," said Sri Mulyani in a press conference on the *Economic Policy Package for Accelerating Inclusive and Sustainable Economic Growth* in Jakarta, Monday (16/12/2024).

Based on its category, the value of the VAT exemption incentive for food reaches Rp77.1 trillion. This includes Rp55.5 trillion for basic necessities (rice, corn, soybeans, sugar, fresh milk, beans, poultry, and others), and Rp26.6 trillion for fisheries and marine products.

Furthermore, there is a VAT exemption for micro, small, and medium enterprises (MSMEs) amounting to Rp61.2 trillion. This incentive is given to MSMEs with an annual turnover of less than Rp4.8 billion.

The VAT exemption for the transportation sector reaches Rp34.4 trillion. This is divided into Rp23.4 trillion for public transportation services, Rp7.4 trillion for special VAT rates for *freight forwarding* services, and Rp2.6 trillion for parcel delivery services.

Education and health services receive a VAT exemption incentive of Rp30.8 trillion, with Rp26 trillion for education services and Rp4.3 trillion for medical health services.

"Whether the school fees are zero or hundreds of millions of rupiah, they have not been subject to VAT. This has caused a lot of discussion regarding the principle of fairness," said Sri Mulyani.

VAT is also exempted for financial and insurance services, amounting to Rp19.1 trillion and Rp8.7 trillion respectively. Thus, the total VAT exemption in this segment is Rp27.9 trillion.

Then, the VAT incentive for the automotive and property sectors amounts to Rp15.7 trillion. This is channeled to the automotive sector (Rp11.4 trillion) and the government-borne VAT (DTP) for the property sector (Rp2.1 trillion).

Electricity and water also receive a VAT incentive of Rp14.1 trillion. VAT is exempted for electricity, except for households with power above 6,600 VA, amounting to Rp12.1 trillion. Then, Rp2 trillion for clean water.

Finally, there are other VAT incentives worth Rp4.4 trillion, including Rp1.6 trillion for free trade zones, and Rp700 billion for religious and social services.