Beware! Buying Custom Goods Could Be Subject to Income Tax 23: Important Lessons from the PT PL Case

Legal Dispute Analysis: Corporate Custom Branding and Gross Assessment Vulnerabilities Under Article 23 Printing Services

The classification dispute between the purchase of goods and printing services became a crucial point in the Income Tax (PPh) Article 23 audit involving PT PL. The Respondent (Tax Authority) made a positive correction to the Tax Base (DPP) of PPh Article 23, arguing that the procurement of sticker labels, cartons, and service tags constituted printing services because they were made based on special orders (custom designs) from the taxpayer.

The Conflict: Tool-Availability Guarantees vs. Non-Marketable Custom Specifications

The dispute exposes a critical operational friction point in B2B supply chains: Does a contract clause ensuring tool accessibility protect raw material values from service-tax extractions when the output carries exclusive intellectual property?

• Appellant's Defense (PT PL): The core conflict lies in the interpretation of the transaction's substance. PT PL argued that the transactions were purely the purchase of production materials from manufacturing vendors, where the term "moulding" in the contract was merely a guarantee of tool availability, not a service. The taxpayer insisted that since the vendors absorbed the raw paper and adhesive costs turnkey, it was an inventory trading transaction.
• Respondent's Approach (DGT/DJP): However, the Directorate General of Taxes (DGT) insisted that the existence of a custom design transformed the nature of the transaction into printing services according to PMK 141/PMK.03/2015, especially since the taxpayer did not separate the value of materials and services in the sales invoices. The state held that custom-printed lubricants labels and tags hold zero market value outside of Pertamina's ecosystem, validating the service reclassification.

Judicial Review: Strict Enforcement of the Statutory Unbundling Rule

The Tax Court Bench looked entirely past the operational intent of the molding clause, ruling that compliance defaults under the ministerial text invalidate downstream exemptions:

1. Statutory Alignment with PMK 141/2015: The Board of Judges, in its legal consideration, emphasized that based on Article 1 paragraph (6) letter ay and letter t of PMK 141/2015, the production of goods with special designs ordered by the buyer is categorized as printing services.
2. Failure to Secure Administrative Relief: Since PT PL failed to present evidence of the material value breakdown separately as required by Article 1 paragraph (4) letter b of PMK 141/2015, the Board upheld the Respondent's correction. The court ruled that it cannot subtract raw material expenses if the taxpayer provides an indistinct, aggregate ledger line.
3. The Gross Valuation Sanction: Consequently, taxpayers must ensure explicit billing separation between goods and services in every custom order transaction to avoid taxation on the total gross value. The court confirmed that surface invoice structure dictates withholding liabilities on customized inventory.

Implications: Enforcing Line-Item Invoice Demarcation in Branded Supply Contracts

In conclusion, this decision reaffirms the supremacy of documentation formalities in determining withholding tax objects:

• A Mandate for Procurement Risk Controls: Taxpayers are advised to review procurement contracts for goods with special specifications and ensure vendors issue invoices that separate material cost components to minimize the risk of similar corrections in the future. Relying on turnkey asset ownership definitions will fail if the item is custom-printed.
• Standard Operating Procedure for Billing Design: To legally protect FMCG packaging portfolios, branded merchandise, or proprietary inputs from automated 2% withholding against the gross contract total, corporate procurement departments must institute a hard system gate. Accounts Payable must mandate that all custom-order suppliers supply an **Itemized Invoice Format explicitly split into: Line Item (1) Base Raw Material Costs (exempt from Article 23), and Line Item (2) Custom Printing/Moulding Service Fees (subject to 2% withholding)**.

Conclusion: The Tax Court rejected the appeal, sustaining the DGT's positive Article 23 income tax assessment on the full gross value. The judgment dictates that **commercial arguments for inventory purchase (substance) are completely defeated** by **the failure to satisfy the explicit line-item material separation rules of PMK 141/2015 on the face of the invoice ledger (form).**