Tax Invoice Valid, But VAT Credit Denied? Case Study of PT JMI

The Tax Court, through Decision Number PUT-004002.16/2024/PP/M.XIIIB Year 2025 pronounced on July 22, 2025, has rejected the appeal filed by PT JMI. This dispute originated from the issuance of a Value Added Tax (VAT) Underpayment Tax Assessment Letter (SKPKB) for the May 2018 Tax Period, where the core issue was the correction of Input Tax by the Directorate General of Taxes (DGT).

The heart of the conflict centered on differing views regarding the fulfillment of conditions for crediting Input Tax. The Appellee (DGT) made the correction based on the assessment that the Input Tax credited by the Appellant did not meet material requirements. The DGT argued that the Appellant failed to prove the authenticity of the transactions underlying the Tax Invoices, even if the Tax Invoices formally existed. Conversely, the Appellant (PT JMI) insisted that all disputed Input Tax was valid and had met both formal and material requirements. The Appellant contended that the transactions were genuine, related to business activities, and the VAT on these transactions had been duly paid to the counterparties (PKP Sellers).

The Panel of Judges (led by Dian Dahtiar) affirmed the DGT's position in its resolution. The Panel held that in Input Tax disputes, the burden of proof (onus probandi) lies absolutely with the Taxpayer (the Appellant) claiming the right to the credit. The Panel assessed that the Appellant was unable to present sufficient and convincing evidence during the trial to prove the material authenticity of the transactions, such as the flow of goods/services and valid payment streams.

An analysis of this decision confirms that the mere possession of a Tax Invoice (formal requirement) is insufficient to secure VAT credit rights. This ruling serves as a stark reminder to Taxpayers of the critical importance of maintaining comprehensive transaction documentation (POs, Contracts, BAST/DOs, and Proof of Payment). Failure in material substantiation will lead to a fatal outcome: the denial of the entire disputed Input Tax credit.

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