Beware! Selling Company Waste and Scrap Can Trigger VAT Corrections

Operational Waste & Business Continuity: Analyzing PT CPJF’s VAT Dispute

The delivery of used goods and operational waste is often overlooked by Taxpayers as non-taxable objects because they are not part of the primary business activity. However, Tax Court Decision Number PUT-013887.16/2022/PP/M.IVA Year 2025 emphasizes that the continuity of transactions is a primary parameter in determining VAT objects.

[Image: VAT scope on the sale of scrap and production waste]

The Conflict: Incidental Sales vs. Routine Business

The conflict centered on the interpretation of Article 4 paragraph (1) letter a of the VAT Law, specifically the phrase "in the course of business or work" regarding used sacks, scrap metal, and egg waste.

• Taxpayer's Defense: Argued that the sale of such waste was incidental and unrelated to their core chicken breeding business.
• Respondent's Stance: Contended that any delivery of BKP by a PKP must be taxed unless specifically exempted by regulation.

Judicial Resolution: The "Continuity" Factor

The Board of Judges reinforced the Respondent's position, pointing out that the scrap sales were conducted routinely throughout the year, thus fulfilling the "business activity" element. The continuity of these transactions integrated them into the taxable framework of the company.

Crucial Warnings: Article 9 and Input Tax Pitfalls

The Board also confirmed legal certainty regarding Article 9 paragraph (8) letter i of the VAT Law:

• No Second Chances: Input Tax not reported in the Periodic Tax Return and only discovered during an audit cannot be credited.
• Implication: This serves as a warning to be more meticulous in mapping VAT objects for all outgoing goods, including scrap, to avoid unexpected tax burdens.