Even though the Purchasing Taxpayer (WP) has fulfilled all formal requirements, such as possessing validly issued Tax Invoices and recording them in their Value Added Tax (VAT) Periodic Tax Return (SPT), the Tax Court consistently affirms that the right to claim Input VAT credit (PM) can be nullified if the Respondent (Directorate General of Taxes/DGT) successfully proves indications of invalidity on the part of the Tax Invoice Issuer. Dispute PUT-008817.16/2024/PP/M.XVIIIA Tahun 2025 serves as a crucial case study concerning the application of Article 9 paragraph (8) letter b of the VAT Law, where PT HI's failure to prove the materiality of transactions for input VAT amounting to Rp133 million led to the rejection of their entire appeal.

The Core Conflict: Shift in the Burden of Proof and Good Faith Defense vs Fictitious Supplier Status

The core conflict in this dispute revolves around the shift in the burden of proof. The DGT initially made the Input VAT correction after its system analysis found that the Tax Invoices being credited were issued by a Taxpayer (Seller) indicated as fictitious or designated as a Non-Effective (NE) Taxpayer. This finding fundamentally cast doubt on the validity of the Input VAT and triggered the application of anti-tax avoidance provisions. The Appellant, PT HI, argued they acted in good faith, recorded the transactions, and possessed supporting documents such as invoices and bank transfer proofs. In the Taxpayer's view, the issues concerning the Seller's status (fictitious/NE) were the Seller's responsibility and should not invalidate the Purchaser's Input VAT right.

Judicial Analysis: Requirement of Physical Delivery Evidence Beyond Formal Accounting Records

However, the Panel of Judges adopted a strong legal opinion, affirming the DGT's position. The Panel asserted that the prima facie evidence presented by the DGT (the fictitious/NE indication) was sufficient to perfectly shift the burden of proof to the Appellant. In this context, the Purchaser is obligated to prove not merely the existence of payment, but the actual physical delivery of the Taxable Goods (BKP) or utilization of the Taxable Services (JKP) and their close connection to the business activities. The Panel concluded that mere formal evidence—such as accounting records and bank transfers—was insufficient without being backed by adequate material evidence like the Handover Minutes (BAST) or detailed shipping documents.

Business Implications: Conditional VAT Crediting Rights and Essential Supplier Due Diligence

The Panel's decision to Reject the Appeal emphasizes the principle that VAT crediting is a conditional right. The implications of this ruling are highly significant for businesses, highlighting the essential need for rigorous Supplier Due Diligence. Purchasing Taxpayers must go beyond formal compliance and proactively secure transaction materiality documentation that can withstand scrutiny in court, as the legal risk associated with the Tax Invoice Issuer's invalidity is now effectively shared by the Purchaser, unless they can prove the truth and validity of the material transaction in trial.

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