IndonesiaS Rice Remains Exempt from VAT Hike
indonesia’s planned increase in Value Added Tax (VAT) from 11% to 12%, effective next year, will not impact the price of domestically produced rice, according to the National Food Agency (NFA).
The NFA head,Arief Prasetyo Adi,clarified that the VAT increase will only apply to imported rice,particularly premium varieties often found in hotels and restaurants. He stated, “as for the Ministry of Finance’s previous presentation, premium rice is listed as being subject to VAT, which means more specifically special rice which cannot be produced domestically. But special rice from certain locations in Indonesia, for example locally produced aromatic rice, is also not subject to VAT. This is so that we can continue to maintain good margins for our local farmers,” in a statement released December 25, 2024.
This distinction is outlined in National Food Agency Regulation Number 2 of 2023, which categorizes rice into premium and medium grades based on grain quality. The NFA has advocated for applying the 12% VAT only to specialty rice unavailable domestically, aligning with Article 3, paragraph 5 of Perbadan 2/2023.
Adi further emphasized the government’s commitment to ensuring affordable rice for consumers. He explained,”Premium rice is in great demand among our society at large. Its distribution is even across all market lines.So this is what the government is paying attention to, so that it is not considered a luxury item and is not subject to VAT as it was before.”
Meanwhile, Coordinating Minister for Food Zulkifli Hasan confirmed that imported premium rice, such as Shirataki rice from Japan, will be subject to the increased VAT. He stated at a recent press conference, “so premium, medium rice is not affected (12% VAT). So those who like Japanese food,Shirataki,I think it’s like that.”
This policy shift has significant implications for Indonesian consumers and the agricultural sector. While protecting domestic rice farmers, the increased cost of imported rice could affect the prices of meals in restaurants and hotels.
Here’s a summary of the article’s key points:
Indonesia is raising its Value Added Tax (VAT) from 11% to 12% starting next year.
Domestically produced rice will be exempt from this VAT increase.
Imported rice,particularly premium varieties like Shirataki rice from Japan,will be subject to the 12% VAT.
Reasons for the Exemption:
Protect domestic rice farmers: The exemption helps ensure local farmers can maintain good profit margins.
keep rice affordable: The government aims to prevent rice from becoming a luxury item due to increased costs.
Classifications:
Premium Rice: This category includes imported specialty rice unavailable domestically. Locally produced aromatic rice is also considered “special” rice and is exempt.
Medium Grade Rice: This category is not affected by the VAT increase.
Impact:
Consumers: Prices for imported premium rice will likely rise, while domestically produced rice will remain affordable.
Farmers: Domestic rice farmers will continue to benefit from tax exemptions, providing economic stability.
Importers: Importers of premium rice will face higher costs,wich might potentially be passed on to consumers.
