Failed to Prove the Flow of Goods and Money: Why Was the Taxpayer’s Input VAT Rejected by the Tax Court Judges?

Tax Court Decision No. PUT-007002.16/2024/PP/M.XVIIIB Year 2025 serves as an important reaffirmation of the provisions regarding the crediting of Input Value Added Tax (VAT), particularly in the context of transactions suspected of being Not Based on Actual Transactions (NBAT) or Fictitious. In the Appeal case filed by PT SAR, the main dispute centered on the positive correction of Input VAT made by the Director General of Taxes (DGT), which resulted in a Null VAT assessment for the April 2021 Tax Period. This issue does not solely concern the fulfillment of the formal requirements of the tax invoice but emphatically stresses the fulfillment of the material substance of the transaction, in line with the mandate of Article 9 paragraph (8) of the Indonesian VAT Law.

The core conflict in the hearing reflects the battle of the burden of proof between the Taxpayer and the DGT. The DGT made the correction arguing that the tax invoices used by the Taxpayer originated from a problematic Taxable Entrepreneur (PKP) Vendor or were not supported by adequate transactional evidence (the flow of goods and/or the flow of money could not be substantiated). On the other hand, the Taxpayer insisted that the transactions occurred and the tax invoices were formally valid. The Taxpayer argued that the responsibility for the PKP Vendor’s status should not be imposed on the Purchaser who acted in good faith.

The resolution to this conflict was determined by the Tax Court Judges, who consistently adhered to the principle of substance over form. The Judges determined that when the DGT demonstrated strong indications of defects in the Input VAT—such as the absence of Output VAT reporting by the PKP Vendor or the PKP Vendor's status having been revoked—the burden of proof to refute these findings shifted entirely to the Taxpayer. The Appellant, in this case, was deemed to have failed to present perfect material evidence, such as detailed purchase contracts, clear goods receipt documents, and, most crucially, convincing proof of payment through banking facilities.

The analysis and impact of this decision carry highly significant strategic implications for all Taxpayers. This ruling serves as a warning that Purchaser Taxpayers can no longer rely solely on the formal aspects of the Tax Invoice but must possess an extremely robust audit trail to prove the existence and legitimacy of the transaction. Without documentation clearly showing the perfect flow of goods and money, the claim for Input VAT crediting will be vulnerable to rejection at the litigation level, consistent with current judicial practice at the Tax Court.

The conclusion to be drawn is that Taxpayers must strengthen tax risk management by implementing strict Know Your Vendor (KYV) policies and ensuring that all transactions underlying the Input VAT are supported by self-proving and irrefutable material evidence.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here