Contract Administration "Batched" into One Day Fails to Convince Judges: IDR 509 Million VAT on Dredging Services Denied Due to Late FPM

A VAT dispute over Taxable Services (JKP) worth IDR 509,325,499 in the PP-BK KSO decision sets an important precedent regarding the integrity of contract administration. The Panel of Judges denied the Input VAT credit because the Input Tax Invoice from PT Global Platinum Engineer (PT GPE) was issued late and also highlighted the impropriety of the issuance of a replacement Handover Acceptance Report (BAST) document.

This dispute began with the DGT's correction of an Input Tax Invoice for dredging services dated December 29, 2017. The DGT argued the Input Tax Invoice was late. During the tax audit, the DGT found evidence that the work had been 100% completed and handed over based on the First Work Handover Report (BAPPP) and a valid BAST-1, which were signed on July 3, 2017. Based on PP No. 1 of 2012, the time of supply for the JKP occurred on July 3, 2017, meaning the Input Tax Invoice dated December 29, 2017, was more than 5 months late.

PP-BK KSO provided a strong rebuttal, stating that the BAST-1 dated July 3, 2017, had been canceled by mutual agreement. This cancellation, according to PP-BK KSO, was necessary due to Contract Addendum II on August 21, 2017, which changed the work volume and removed the retention period. PP-BK KSO claimed the valid JKP supply only occurred based on a replacement BAST dated December 29, 2017. Therefore, the Input Tax Invoice issued on the same date (December 29, 2017) was considered timely.

The Panel of Judges did not believe the arguments and documents submitted by PP-BK KSO. The Panel remained convinced that the BAST-1 dated July 3, 2017, was the valid proof of the JKP supply. The Panel's key consideration was the 'impropriety' (unusual nature) of PP-BK KSO's document administration. The Panel found that all supporting documents for the rebuttal—including the Canceled BAPPP, Replacement BAPP, Replacement BAST 1, Replacement BAST 2, Invoice, Receipt, and the FPM—were all issued and signed simultaneously on the same single day: December 29, 2017.

The Panel of Judges concluded that the Input Tax Invoices (for both the main work and the retention) were issued more than 3 months late from the actual JKP supply date (July 3, 2017). This 'Denied' decision affirms that the integrity and reasonableness of the document administration workflow (BAST) are crucial in tax dispute evidence. Efforts to 'fix' documents in an improper or 'batched' manner demonstrably failed to convince the Panel of Judges.

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