Factory Canteen LPG VAT Non-Creditable? PT HI Loses Appeal, Here’s Why!

VAT on Canteen LPG: Analyzing the Strict Limits of "Direct Connection" in the PT HI Ruling

The dispute between PT HI and the DGT reaffirms the strict limits on what is considered to have a "direct connection with business activities" in the context of VAT. This time, the purchase of LPG for the employee canteen was the subject of the dispute. The Respondent corrected the Input Tax because they deemed that employee nutrition is not technically part of the yarn production value chain.

Perspective Conflict: Management Costs vs. Benefits-in-Kind

This conflict highlights the differing perspectives between company management and tax authorities. For companies, healthy employees are key to production, thus canteen costs are management costs. However, for the tax authorities and the Board of Judges, these expenditures lean more toward benefits-in-kind, which under Article 9 Paragraph (8) Letter b of the VAT Law, are ineligible for tax credits.

Judicial Resolution and Mitigation Strategy

This ruling serves as an important reminder for industrial players to be more cautious in sorting their Input Tax. The risk of correction is very high for items related to employee facilities. The recommended strategy is to avoid forcing credits on benefit-in-kind expenditures to prevent future administrative sanctions.