The Buyer Failed to Remit VAT, Why Is the Seller Targeted? Dissecting the VAT Dispute of PT RI vs. Director General of Taxes

VAT Dispute November 2020: Procedural and Substantive Issues

The VAT dispute for the November 2020 tax period between PT RI and the Directorate General of Taxes (DGT) highlights two fundamental issues: the procedure for issuing Rectification Decisions and the substance of VAT collection by third parties. The conflict began when the Respondent made a positive correction to Deliveries for which VAT Must Be Collected by the Taxable Person through a reclassification mechanism. The Respondent shifted from the initial argument regarding unidentified Tax Payment Numbers (NTPN) to the reason of "no evidence of remittance from the counterparty" during the court proceedings. However, the Respondent's step of issuing a Rectification Decision (KEP-NKEB) after the 12-month period stipulated in Article 26 of the KUP Law and while the appeal process was ongoing became a fatal procedural weakness.

Core Material Conflict and Remittance Responsibility

The core of the material conflict lies in the differing views on the responsibility for VAT remittance for transactions with VAT Collectors (invoice codes 020/030). The Respondent insisted that without evidence of remittance in their system, the delivery must be categorized as a delivery collected by PT RI itself. On the other hand, PT RI as the Appellant provided strong evidence in the form of Invoices and Tax Invoices that had been correctly reported. The Appellant emphasized that based on Article 16A of the VAT Law, the obligation to collect and remit VAT on transactions with Government Treasurers or State-Owned Enterprises (BUMN) rests entirely with the collector, not the goods/service provider.

Legal Consideration of the Board of Judges

The Board of Judges, in their legal consideration, stated that the Rectification Decision issued by the Respondent exceeding the 12-month limit from the date the objection was received is invalid and must be legally annulled. Substantively, the Board assessed that PT RI had fulfilled its formal obligations. System failures or negligence of the collector in remitting taxes should not be charged to the selling Taxpayer through an Output Tax correction. The Board emphasized that the DGT should pursue the tax remittance from the collector who has the statutory obligation, rather than unilaterally reclassifying the transactions against PT RI.

Implications for Legal Certainty

This ruling provides important implications for legal certainty in Indonesia. First, it affirms that the DGT cannot use the pretext of rectification to change the substance of a dispute outside the timeframe regulated by the KUP Law. Second, this decision strengthens protection for Taxpayers against the threat of misplaced joint liability in transactions with VAT collectors. In conclusion, the state's right to claim unremitted VAT must be directed to the tax subject who, by law, is required to make the remittance, ensuring justice for taxable entrepreneurs is maintained.