Ready Mix Tax Invoice Issued When Invoice is Issued? Tax Court Rejects 28-Day Quality Test Pretext, Input VAT on Ready Mix BKP Denied

The Tax Court's decision on the PP-BK KSO dispute highlights crucial Input VAT crediting risks for the construction and manufacturing industries. The DGT's correction was based on Article 19 of Government Regulation (PP) No. 1 of 2012, where the Input Tax Invoice (FPM) from PT Prima Karya Manunggal (PT PKM) was deemed 3 months late due to differing definitions of the 'time of supply' for tangible Taxable Goods (BKP).

In this case, PP-BK KSO credited Input VAT amounting to IDR 22,309,210 for the purchase of ready mix (precast concrete) from PT PKM. The FPM was issued on December 12, 2017. The DGT (Directorate General of Taxes) corrected this Input VAT, arguing the FPM was issued late. According to the DGT, this transaction was a supply of tangible BKP. Based on evidence from Delivery Notes and Warehouse Receipt Vouchers, the physical delivery of the ready mix occurred on several dates in August 2017. In accordance with PP No. 1 of 2012, the FPM should have been issued no later than 3 months after August 2017 (i.e., November 2017), thus the FPM dated December 12, 2017, was late and could not be credited.

PP-BK KSO refuted the correction. PP-BK KSO argued that the 'time of supply' only occurred when the invoice (sales invoice) was issued, not when the goods were physically received. This argument was based on Article 17 paragraph (3) letter a of PP No. 1 of 2012. The reason billing could only be done on December 12, 2017, was the need to wait for the results of the 28-day concrete quality test (slump test) to ensure the BKP specifications were met.

The Panel of Judges rejected all of PP-BK KSO's arguments. In its considerations, the Panel of Judges affirmed that this transaction was purely a sale and purchase of tangible BKP, not a construction service. The Panel stated that the 28-day quality test argument was irrelevant for determining the fiscal 'time of supply' of the BKP. The time of supply was proven to have occurred in August 2017 when the BKP was physically delivered (as per the Warehouse Vouchers).

This decision confirms that the FPM was proven to be more than 3 months late. The Panel of Judges decided to reject the appeal on this disputed item. This case sets an important precedent that commercial administration (such as billing mechanisms awaiting quality test results) cannot override or delay the moment VAT is due (the time of supply of BKP) as regulated by tax provisions.

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