Beware! Selling Your Company’s Scrap and Used Goods Could Lead to Costly Tax Findings

Used Goods & The "Business Activity" Trap: Analyzing PT CPJF’s VAT Dispute

VAT disputes over the sale of used goods often become a trap for Taxpayers who misunderstand the expanded definition of "delivery in the course of business or work." In Decision Number PUT-013877.16/2022/PP/M.IVA Year 2025, PT Charoen Pokphand Jaya Farm (CPJF) faced a VAT Base (DPP) correction on the sale of used sacks and scrap metal.

The Conflict: Main Inventory vs. Incidental Sales

The core issue lies in whether the delivery of goods that are not the company's main inventory remains subject to VAT under Article 4, paragraph (1), letter a of the VAT Law.

• The Respondent's Stance: As long as the delivery is made by a PKP and the goods are BKP not specifically excluded, VAT must be collected.
• The Petitioner's Defense: Argued that such sales were incidental, not listed in the company’s purposes in the Deed of Establishment, and not within the framework of main business activities.

Judicial Opinion: Routine Nature Overrules Deed Definitions

"Regarding the phrase 'in the course of business or work,' the Bench emphasized that as long as the transaction occurs repeatedly or routinely within a period, it is integrated into the company's overall business activities. The fact that PT CPJF sold used goods routinely every month served as strong evidence that these activities fall within the scope of business activities intended by the law."

Implications: Auditing "Other Income" Streams

This decision confirms that the definition of "business activity" in VAT has a broad and dynamic scope. Any delivery of BKP, including production waste, is a VAT object if done routinely.

Key Takeaways for Taxpayers:

• Review all "Other Income" streams to ensure they are not silent VAT triggers.
• The Economic Substance approach adopted by Judges means the actual behavior of the business carries more weight than the formal Articles of Association.