The classification of VAT objects for religious services became a pivotal issue in the dispute between PT FWT and the DGT. The conflict centered on a VAT base correction of IDR 399.9 million, where the authority reclassified religious services as taxable travel agency activities.
PT FWT argued that as a licensed Umrah Pilgrimage Organizer (PPIU), its services were exempt under Article 4A of the VAT Law. However, the DGT found that PT FWT did not provide direct religious guidance. Instead, it acted as a facilitator for tickets and visas for other travel agents—a Business-to-Business (B2B) intermediary role.
The Board of Judges concluded that the economic substance of the transaction was an intermediary travel service. Because the beneficiaries were other business entities rather than the pilgrims themselves, the services lost their religious exemption. PT FWT’s inability to prove it independently executed Umrah rituals per Ministry of Religious Affairs regulations further supported the DGT's reclassification.
This decision serves as a reminder that VAT-exempt facilities demand strict material compliance. For PPIU businesses, simply holding a license is not enough; they must ensure their entire service chain is directly documented to pilgrims. If the business acts as a wholesaler for other agents, the turnover will likely be treated as a taxable VAT object.
The Court upheld the DGT's correction, reinforcing that tax exemptions are narrow and fact-dependent. To maintain non-VATable status, the direct legal and spiritual relationship between the organizer and the pilgrim must be the primary substance of the transaction.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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