Crushing Defeat in the Tax Court: DJP Fails to Cancel Input Tax Crediting for Logistics Services Worth Hundreds of Millions of Rupiah! 

Tax Court Decision Number PUT-012203.16/2023/PP/M.IIIA Year 2025

Tax regulations governing Value Added Tax (VAT) for the freight forwarding services sector frequently trigger disputes, particularly regarding the implementation of the Value in Lieu Tax Base (DPP Nilai Lain) in accordance with Minister of Finance Regulation Number 121/PMK.03/2015. Under the Value in Lieu scheme, VAT is imposed at only 10% of the total amount billed (resulting in an effective VAT rate of 1%), which carries the consequence of the Taxpayer losing the right to credit Input Tax (PM). Tax Court Decision Number PUT-012203.16/2023/PP/M.IIIA Year 2025 serves as an important case study because it explicitly tests the limits of the tax authority's jurisdiction in forcing the use of the Value in Lieu scheme.

The Core of the Conflict

The core of the conflict in this ruling initiated from an Input Tax correction by the Directorate General of Taxes (DJP) against PT ALT amounting to IDR 151,435,195.00. The DJP argued that the Taxpayer, who substantively and by business classification is a provider of freight forwarding services, is obligated to use the Value in Lieu Tax Base pursuant to PMK Number 121/PMK.03/2015. Logically, if the Value in Lieu scheme must be applied, then under Article 3 letter d of the PMK, the related Input Tax automatically cannot be credited, which subsequently became the basis for the correction. However, PT ALT insisted that during the disputed Tax Period, they had chosen to apply the normal VAT mechanism. Under this normal mechanism, the Taxpayer collects 10% VAT on the total transaction value (Full Tax Base) and issues Tax Invoices with code "01", which fundamentally grants the right to credit Input Tax as long as it satisfies the formal and material requirements of the VAT Law.

Panel of Judges Analysis

The Panel of Judges of the Tax Court analyzed this dispute based on the principles of hierarchy and the substance of tax law. The Panel reinforced that pursuant to Article 8A paragraph (2) of the VAT Law, the use of Value in Lieu is not a mandatory obligation, but rather a simplification option offered to the Taxpayer. Given this choice, the Taxpayer has the right to select the VAT mechanism that best suits its business conditions. Since PT ALT was proven to have collected Output VAT based on the Full Tax Base (the normal mechanism), the legal basis for the DJP's correction—which referred to the prohibition of Input Tax crediting under the Value in Lieu scheme—becomes irrelevant and falls away on its own.

Legal Resolution and Implications

This legal resolution carries significant implications for the logistics and transportation services sector. The ruling of the Panel of Judges has provided legal certainty that the choice of VAT mechanism is a right belonging to the Taxpayer. As long as the Taxpayer consistently issues Output Tax Invoices at 10% of the Full Tax Base and credits Input Tax in accordance with general provisions, the tax authority cannot force the Value in Lieu mechanism based solely on the KLU classification or the substance of the services. By granting the Taxpayer's appeal request in its entirety, Decision Number PUT-012203.16/2023/PP/M.IIIA Year 2025 underscores the principle of prudence in determining the VAT Tax Base and protects the Taxpayer's right to obtain a credit for valid Input Tax.

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