Input VAT Rejected by the DGT Due to 'Ghost' PKP? The Ultimate Strategy for Winning an Appeal Based on the Latest Ruling!

Tax Court Decision on Input VAT Crediting Dispute of PT SAR

In the context of implementing the Value Added Tax Law, the crediting of Input VAT faces a serious challenge when the Directorate General of Taxes (DGT) rejects Tax Invoices originating from a Taxable Entrepreneur (PKP) whose status is doubtful or allegedly fictitious, making proof of substance the core legal issue. Tax Court Decision Number PUT-007016.16/2024/PP/M.XVIIIB Tahun 2025 provides important guidance for Taxpayers regarding the disputed issue of Input VAT rejected by the DGT. The case involved PT SAR (Appellant) whose Input VAT was corrected because the credited Tax Invoices (FP) were issued by a PKP whom the DGT deemed to have no real business activities or whose status had been revoked. This rejection was based on Article 9 paragraph (8) letter b of the VAT Law.

Core Conflict and Differing Interpretations of Crediting Requirements

The core conflict lies in the differing interpretations regarding the requirements for crediting VAT and the burden of proof. The DGT argued that the doubtful status of the issuing PKP was sufficient grounds for rejection, indicating that the Tax Invoice violated both formal and material provisions. Meanwhile, the Appellant insisted that the transaction for the purchase of goods or services was genuine and that they had acted in good faith. The Appellant maintained that they had met all the formal requirements of the FP and had settled the payment, thus the non-compliance or status of the counterparty's PKP should not void their right to credit the VAT that had been paid.

Panel of Judges Ruling on Transaction Materiality and Good Faith

The Panel of Judges in this case did not automatically accept the DGT's argument solely based on the status of the counterparty's PKP. Utilizing its authority under Article 26A of the KUP Law, the Panel shifted the focus to proving the materiality of the transaction. The Panel emphasized that the Appellant was obliged to convincingly prove the flow of goods/services and the flow of money. Based on the evidence presented, such as contracts, delivery orders, and especially validated bank transfer proofs, the Panel of Judges decided to partially grant the appeal. This decision underscores that a good-faith Taxpayer, even when dealing with a problematic PKP, can still win a dispute if they can present strong evidence of the substance of the transaction.

Practical Implications and Precedent for VAT Litigation

This Partial Grant decision has significant implications for business practices in Indonesia. Taxpayers now face a higher standard of proof; merely ensuring the formality of the Tax Invoice is insufficient. The implication is an urgent need to implement strict due diligence procedures on suppliers and ensure all supporting transaction documentation, especially proof of payment via a bank account registered under the counterparty's PKP name, is properly archived. This decision serves as a precedent that proving materiality, rather than just formal status, is the ultimate determinant in Input VAT disputes. This ruling by the Panel of Judges marks an important milestone in VAT litigation, balancing the fiscal authority's efforts to combat fictitious invoices with the protection of good-faith Taxpayers. The Appellant's partial victory proves that a legal defense based on the materiality of the transaction evidence is the most effective strategy when facing corrections on Input VAT from a PKP whose status is questionable.

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