Govt Unveils Economic Stimulus Package as 12% VAT to Take Effect in 2025

TEMPO.CO, Jakarta - The government has confirmed that the increase in Value Added Tax (VAT) to 12% will proceed as scheduled, effective January 1, 2025, as mandated by Law Number 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP).

“The 12% VAT rate will be implemented starting January 1, 2025, while ensuring principles of fairness and equity,” stated Coordinating Minister for Economic Affairs, Airlangga Hartarto, during a press conference on the Economic Stimulus Package held at the Office of the Coordinating Ministry for Economic Affairs in Central Jakarta on Monday, December 16, 2024.

Airlangga emphasized that the government will concurrently implement a comprehensive economic stimulus package to mitigate the potential impact of the VAT increase on the public. This package includes the continuation of VAT exemptions for essential goods and services, such as staple foods, transportation, education, healthcare, water usage, financial services, and insurance.

“In addition, the government will provide several incentives, particularly to support low-income households to maintain their purchasing power,” he said.

Here is a list of the components of the economic stimulus package:

1. VAT exemption or government-borne Value Added Tax (PPN DTP) for Minyakita cooking oil

2. VAT exemption for Wheat Flour

3. VAT exemption for Industrial Sugar

4. Food/rice assistance for two months (January to February 2025)

5. 50 percent electricity bill discount for customers with 2200 VA or lower power for two months (January to February 2025)

6. VAT exemption for Property

7. VAT exemption for Electric Vehicles (EV)

8. Sales Tax on Luxury Goods (PPnBM) exemption for EV

9. PPnBM exemption for Hybrid Motor Vehicles

10. Exemption from Import Duty for Electric Vehicles (EV)

11. Income Tax Article 21 exemption for Labor-Intensive Sectors

12. Support for workers who have been laid off 

13. Final Income Tax exemption for Micro, Small, and Medium Enterprises (MSME)

14. Financing schemes for labor-intensive industries

15. 50% discount on Work Accident Insurance (JKK) contributions

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