The correction of Input Tax by the Respondent against PT KMB triggered a dispute due to allegations of using Tax Invoices not based on actual transactions. The Respondent invoked Article 13 paragraph (5) of the VAT Law and Article 33 of the KUP Law regarding joint and several liability, as the counterparty was indicated as a fictitious Tax Invoice issuer failing to remit VAT to the state. However, the Board of Judges emphasized that the Respondent's burden of proof must not overlook the economic reality of transactions conducted by a taxpayer acting in good faith.
The core of the conflict centered on the dualism between the counterparty’s administrative compliance and the buyer’s economic substance. The Respondent insisted that the seller's "failure to file tax returns" status automatically nullifies the buyer's right to claim Input Tax credits under KEP-754/PJ/2001. Conversely, KMB fiercely countered by presenting concrete evidence, including bank statements demonstrating cash outflows and delivery documents verifying the flow of goods. KMB argued that the obligation to remit tax lies within the seller's domain as the collector, not the buyer who has already fulfilled its payment obligations.
The Board of Judges, in its legal considerations, sided with the principles of legal certainty and fairness for good faith buyers. The Judges opined that as long as the buyer can prove VAT payment to the seller and that the goods were genuinely used for business activities, the right to credit cannot be revoked due to the seller's unilateral violations. The implication of this ruling strengthens protection for taxpayers against arbitrary actions by tax authorities attempting to shift tax collection responsibilities onto innocent third parties. In conclusion, the validity of Input Tax must be tested through a substance-over-form approach, prioritizing cash and goods flow evidence.
A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here
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