Basically all goods and services are subject to tax, except for the types of goods and services stipulated in the law. Goods that are subject to tax are called Taxable Goods (BKP). While services subject to tax are called Taxable Services (JKP).
Further provisions regarding BKP and JKP have been regulated in Law Number 8 of 1983 as last amended by the Law on the Harmonization of Tax Regulations (UU HPP). In line with the promulgation of this regulation, the Directorate General of Taxes (DGT) via press release Number SP-63 of 2022 announced the enactment of Government Regulation (PP) Number 44 of 2022 concerning the Application of VAT on Goods and Services and PPnBM, as its derivative regulations.
The new provisions are divided into three major groups, namely new substance, enhanced substance, and unchanged substance. One of the new substances is further regulation regarding BKP and JKP. There is an affirmation of the imposition of VAT on the submission of BKP/JKP carried out in operational and non-operational activities.
However, there are types of services whose delivery is not subject to VAT. The existence of services that are not subject to VAT arises because of economic, social and cultural considerations.
This consideration is based on the fact that there are several services whose use involves the livelihood of many people. In addition, there are services whose existence is intended for religious interests, and there are also services that are not intended for commercial purposes.
Related to economic considerations, the existence of services that are not subject to VAT is more because the delivery of these services has been subject to Regional Taxes and Regional Retribution (PDRD). So, if VAT is charged, there will be double taxation. One form of service that is not subject to VAT to avoid double taxation is a music concert.
Referring to the Regulation of the Minister of Finance Number 70/PMK.03/2022, music concerts as one of the arts and entertainment services are included in certain types of services that are not subject to VAT. This is because music concerts have become local tax objects in accordance with applicable laws and regulations.
Regional tax collection is the authority of regional governments both at the provincial, district and city levels. In general, the entertainment tax rate is determined uniformly, namely 10 percent at the highest. However, regional governments are still given room to set higher tax rates on certain entertainment services such as discotheques, nightclubs, karaoke, bars or steam baths.
For example, for the Special Capital Region of Jakarta (DKI) Province, music concerts are subject to an entertainment tax rate, the amount of which depends on the scale of the music concert being held. Local scale music concerts are subject to a tax rate of 0% of the Tax Imposition Basis (DPP). Meanwhile, for music concerts on a national and international scale, the rates are 5% and 15% respectively from the DPP.
The DPP for music concerts in the DKI Jakarta entertainment tax calculation is in the form of the amount of money received or should have been received by the entertainment organizers and includes price discounts and free tickets given to recipients of entertainment services.