Lost Lawsuit on Umrah Service VAT: PPIU License is Not Enough, Travel Agent Service Qualification Limited by Economic Substance 

The Umrah pilgrimage travel industry in Indonesia frequently encounters complexities in determining Value Added Tax (VAT) objects due to the existence of exemptions for religious services.

The Tax Court Decision Number PUT-001275.99/2024/PP/M.XVIA Year 2025 serves as an important marker in defining the boundary between Religious Services that are Non-Taxable Services (Non-JKP) and Travel Agency Services that are subject to VAT, while concurrently strengthening the material examination jurisdiction in non-SKP administrative disputes. This decision centers on the rejection of the request for the cancellation of a VAT Underpayment Assessment Letter (SKPKB) submitted by PT FWT based on Article 36 paragraph (1) letter b of the KUP Law. The Taxpayer argued that the organization of Umrah pilgrimage services constitutes a Religious Service exempted from VAT, making the underlying SKPKB incorrectly issued and mandatory to be canceled by the Director General of Taxes. 

The core conflict underlying this dispute lay in the differing qualifications of the services.

The Directorate General of Taxes (DIPP) rejected the cancellation of the SKPKB because it identified that although the Plaintiff formally held a licensed Umrah Pilgrimage Travel Organizer (PPIU) status, its business practices demonstrated that the Plaintiff acted as a logistics intermediary (wholesaler) providing tickets and accommodation to other travel agents. DJP argued that this activity was not a supply of comprehensive religious services, but rather a Travel Agency Service subject to VAT. This rejection was subsequently challenged through a lawsuit by the Taxpayer, who insisted that the PPIU license and the VAT exemption for Religious Services must be absolutely recognized. 

In its legal considerations, the Panel of Judges took a firm stance regarding two crucial issues.

First, the Panel asserted that the Tax Court possesses full authority to materially examine the underlying parent SKPKB, not merely limited to the issuance procedure of the Article 36(1)b KUP rejection decision. This represents a progressive step toward protecting Taxpayers' rights. Second, despite acknowledging the principle of VAT exemption for Religious Services, the Panel applied the Substance Over Form principle. The Panel found that the Taxpayer failed to prove the execution of all PPIU obligations—which include pilgrimage guidance—coupled with the fact that the Plaintiff's clients were other travel agents operating under a fee/margin mechanism. 

The resulting resolution was that the Panel of Judges decided to reject the Plaintiff's lawsuit.

This rejection implicitly strengthens DJP's position that the services supplied substantively constitute Taxable Services and the SKPKB subject to the cancellation request remains valid and correct. 

The implications of this decision are highly significant for the pilgrimage travel sector.

Taxpayers operating within the PPIU sector must immediately review their business practices. Holding a formal PPIU license is no longer a solitary fortress to claim Non-Taxable Service status. Taxpayers must ensure that transaction documentation, contracts, and accounting records fully reflect pure religious services rendered directly to pilgrims. If a Taxpayer acts as a logistics wholesaler to other travel agents, they are potentially liable for VAT, and the special VAT computation mechanism for certain Taxable Services (as regulated under PMK 71/PMK.03/2022) must be carefully evaluated.