The Indonesian government is considered ambitious in paying attention to the agricultural sector. Every year there are developments in a better direction. In 2020, the commodity from the agricultural sector that is targeted to reach the level of self-sufficiency is soybeans, in 2024 it is targeted for industrial sugar, in 2026 it has a target for beef, and in 2045 it has a target for Indonesia to become a world food barn.
In Indonesia, agriculture is divided into two sectors. First, large private or state-owned plantations, this sector focuses on producing export commodities such as oil and rubber. Second, the production of small farmers, this sector focuses on producing food ingredients such as corn, rice, fruit and vegetables.
The success of producing abundant agricultural products or food self-sufficiency cannot be separated from the role of farmers and the government. The government makes and determines policies for the success of Indonesian agriculture in the future. One of them is the regulation on the imposition of Value Added Tax (VAT) on certain agricultural products at a lower rate than the general VAT rate.
Through the Regulation of the Minister of Finance (PMK) Number 64/PMK.03/2022 the government made adjustments to VAT rates and types of goods for delivery of certain agricultural products based on the Law on Harmonization of Tax Regulations. This is nothing new, the imposition of a tax on the delivery of certain agricultural products has existed since 2013. Agricultural products are considered taxable goods handed over by groups of farmers to buyers with a business circulation of more than IDR 4.8 billion. This means that for farmers who have a turnover in one year below IDR 4.8 billion, they are not subject to VAT.
This regulation also says that as of April 1, 2022, a Taxable Entrepreneur (PKP) who delivers certain agricultural products can collect VAT which is calculated using a certain amount, namely 1.1% of the selling price. The 1.1% rate is obtained by multiplying 10% by the general VAT rate, which is 11%. The 1.1% rate is the effective rate. This rate will increase to 1.2% when the general VAT rate of 12% is enforced no later than January 1, 2025.
The regulation also explains that one of the agricultural product commodities that is subject to VAT is rice. The types of rice referred to in this regulation include straw, husk, rice bran, bran, straw, and their compost. As for rice, getting VAT facilities is exempt. The reason is because rice is included in the group of staple goods needed by many people. This is in accordance with Article 16B of the VAT Law on taxable goods that get VAT facilities exempted.
For more details, let’s understand the following saga. Tria’s mother is a rice middleman. He has also been designated as a PKP by the local tax service office (KPP). In February 2023, Mrs. Tria sold dry paddy worth IDR 100 million. These activities are subject to VAT at a rate of 1.1% of IDR 100 million or IDR 1,100,000.00. During her submission, Mrs. Tria collected and deposited VAT and submitted a notification to the head of the KPP where she was confirmed.
Of course not all agricultural commodities are subject to this VAT. Agricultural products that are subject to a certain amount of VAT are divided into four groups.
The first group is plantation products consisting of 24 types of commodities consisting of oil palm, cocoa, coffee, sugar palm, cashew, pepper, nutmeg, cloves, rubber, tea, tobacco, sugarcane, cotton, cotton, hemp raw fiber, and the like. , cinnamon, quinine, vanilla, patchouli, jatropha, lemongrass, essential oils, coconut, plantation crops, and the like.
The second group is food crops consisting of four types of commodities, namely rice, corn, legumes consisting of peanuts and green beans, and tubers consisting of cassava, sweet potatoes, taro, arrowroot, gembli and other tubers. .
The third group is ornamental and medicinal plants which consists of three commodities, namely ornamental plants, cut plants, and medicinal plants.
The fourth group is forest products, which are divided into two sub-groups, namely timber forest products and non-timber forest products, with a total of ten types of commodities. Timber Forest Products (HHK) consist of timber, oil palm, and rubber. Meanwhile, non-timber forest products (NTFPs) consist of bamboo, rattan, gaharu, agathis, shirea, candlenut and tengkawang.
PKP that collects a certain amount of VAT on agricultural products must make a tax invoice in accordance with the provisions. PKP must make a notification to the head of the KPP where the PKP is confirmed to collect VAT with a certain amount. However, for PKP who previously collected VAT on the basis of imposing other value taxes according to Minister of Finance Regulation Number 89 of 2020, there is no need to submit a notification.
On the other hand, PKP is given the option to switch to collecting VAT at the general rate. This is explained in Article 5 paragraph (1) and Article 10 paragraph (2). If you have used the general rate, PKP can no longer collect VAT on agricultural products with a certain amount.