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Definition of VAT and the amount of the rate

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You must have made a purchase transaction and the selling price turned out to have increased from the offered price, the seller usually argues that the current price of the goods has not been subject to VAT.

Everyone who transacts either goods or services will be subject to VAT. So far, almost everyone has always been in contact with this VAT, but there are still many who do not know what VAT is or the amount of tariff applied to each transaction.

So, what exactly is VAT and how do you determine the amount of VAT on each transaction that takes place and who should be subject to VAT.

VAT is an abbreviation of Value Added Tax or tax levy imposed on every sale and purchase transaction of goods and services in the country that must be carried out by taxpayers, both personal and taxpayers in the form of business entities or the government.

VAT object

From this definition of VAT, it is clear that what should do collection VAT and reporting VAT for every transaction there is a seller of goods or services, but the party who must pay VAT is the buyer or consumer who buys the product or service.

Because VAT is included in the indirect tax category, the final consumer or buyer who is the tax bearer does not deposit VAT directly into the state treasury but through another party, in this case the seller.

The determination of the application of Value Added Tax (PPN) is regulated by Law Number 42 of 2009 concerning Value Added Tax of Goods and Services and Sales Tax of Luxury Goods (PPNBm).

Objects of Goods and Services Subject to VAT

The government also regulates every type of goods and services subject to Value Added Tax (VAT), namely;

  1. Delivery of taxable goods (BKP) and taxable services (JKP) within the customs area by entrepreneurs
  2. Import of taxable goods (BKP)
  3. Utilization of intangible taxable goods and JKP from outside and within the customs area
  4. Exports of tangible and intangible taxable goods and exports of taxable services carried out by taxable entrepreneurs (PKP)
  5. Activities to build their own buildings with an area of ​​more than 200 meters which are carried out outside the company environment or work by individuals or business entities whose results are used for themselves or others
  6. Delivery of assets which, according to their original purpose, are not traded, provided that the input tax paid at the time of the acquisition of these assets may be credited.

Types of Goods and Services Not Subject to VAT

Meanwhile, the types of goods or services that are not subject to VAT consist of;

  1. Mining or drilling goods in the earth
  2. Goods in the form of basic food needs, namely; rice, corn, milk, vegetables and meat
  3. Money, gold bullion and securities
  4. Food, drinks in a restaurant or restaurant
  5. Medical services, social services, financial services, insurance and education

In general, the VAT rate applied to every transaction of goods and services is 10 percent for domestic deliveries, while for exports BKP and JKP exports are subject to a special VAT rate of 0 percent.

The general VAT rate of 10 percent is also subject to change, but it can’t be lower than 5 percent and the maximum is 15 percent in accordance with the laws and regulations set by the government.

That was a little review about the meaning of VAT, the legal basis for VAT, the object of VAT to the amount of VAT rates that have been set and regulated by the government. (mz)

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