VAT 12% on Luxury Goods: Challenges and Effective 11% Rate

Aditya Wicaksono, a partner at GNV Consulting, outlined the challenges of applying a 12 percent VAT on luxury goods during a talk‑show held in Jakarta on 3 November 2025. He noted that the new rate is not imposed on all goods and services, but only on selected luxury items.

Although the statutory rate rose to 12 percent, the Directorate General of Taxes (DGT) adjusted the Tax Base (DPP) to 11/12, keeping the effective rate at 11 percent in practice. The adjustment introduced a new tax factor code, and the DGT granted a three‑month transition period for taxpayers to correct coding errors.

The 11 percent effective rate continues to apply to most transactions, while the higher rate for luxury goods remains mandated by law. A further reduction in VAT could cut state revenue sharply, with an estimated loss of IDR 70 trillion for each percentage point decrease.