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November 25, 2024 | 12:32 pm
TEMPO.CO, Jakarta - Chair of the Indonesian Fiber and Filament Yarn Producers Association (APSyFI), Redma Gita Wirawasta, pointed out that the upcoming increase in Value Added Tax (VAT) from 11% to 12% will result in additional costs for producers, and that will be passed on to consumers.
“This additional cost will strain our already tight cash flow,” Redma told Tempo on Sunday, November 24, 2024.
He explained that previously, producers were required to pay an 11% VAT on raw material purchases. With the VAT increase, this cost will rise to 12% starting from January 1, 2025. Subsequently, these additional costs will be incorporated into the final product price, ultimately borne by consumers.
“Consumers will pay a 12% VAT on the final product, while businesses will remit the difference between the input and output VAT to the government,” Redma said.
The association, he claimed, has discussed the matter with the Indonesian Textile Consumers Foundation (YKTI) and concluded that this additional burden will indeed be passed on to the end consumers.
Ardiman Pribadi, Executive Director of the Indonesian Textile Consumers Foundation (YKTI), explained that with the previous 11% VAT, the effective tax burden on consumers was already 19.8% due to cascading effects throughout the supply chain.
“If the VAT is raised to 12%, the consumer burden will rise to 21.6% of the actual price of the goods,” Ardiman said in a written statement on Sunday, November 24, 2024.
Amid the declining purchasing power of the public, Ardiman expressed concerns that this VAT hike will further decrease textile consumption among the community. He believed this could have unintended consequences, as it may hinder the government's goal of increasing state revenue.
Instead of raising taxes, Ardiman suggested that the government should prioritize efforts to combat illegal imports. Based on the trade map data for the past five years, the state lost about Rp46 trillion annually due to unrecorded textile imports.
The value of goods entering without customs duties, VAT, and Income Tax reached US$7.2 billion or around Rp106 trillion. “If illegal imports are eradicated, state revenue from the textile and textile product (TPT) industry could increase by Rp9 trillion per year without raising the VAT,” Ardiman said.
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