Umrah Services Subject to VAT? Check Out the Tax Court Decision Rejecting PT FWT’s Appeal!

Umrah Services Subject to VAT? Check Out the Tax Court Decision Rejecting PT FWT’s Appeal!

PUT-001271.99/2024/PP/M.XVIA Year 2025 | Dated June 26, 2025

The imposition of Value Added Tax (VAT) on services not explicitly defined as taxable objects often becomes a source of dispute, as seen in the Tax Court Decision No. PUT-001271.99/2024/PP/M.XVIA Year 2025. This ruling highlights a VAT dispute between PT FWT, which claimed that its activities qualified as “religious services” exempt from VAT, and the Directorate General of Taxes (DGT), which classified them as “travel bureau services” subject to VAT. The core issue lies in the interpretation and implementation of Article 4A paragraph (3)(f) of the VAT Law.

In this case, the Plaintiff (PT FWT) based its argument on its legal status as an authorized Umrah Travel Organizer (PPIU), in accordance with the relevant regulations, including the Law on Hajj and Umrah Administration and Minister of Religious Affairs Regulation No. 18/2015. The company contended that all of its activities related to organizing Umrah — providing accommodation, meals, transportation, healthcare, and religious guidance — were integral components of religious services.

On the other hand, the Defendant (DGT), through the Tax Audit Report (LHP), found that the Plaintiff did not directly engage with Umrah pilgrims, but instead sold its services to other travel agents. Based on these findings, the DGT considered PT FWT’s activities to be intermediary services, which according to Minister of Finance Regulations No. 75/2011 and No. 121/2015, fall under the category of travel bureau services subject to VAT.

The Tax Court Panel of Judges, in its ruling, provided a clear legal reasoning that favored the substance over the form of the transaction. Although the Court acknowledged the Plaintiff’s formal status as a licensed PPIU, the evidence presented in court showed that the services were rendered to travel agents rather than directly to pilgrims. The Panel concluded that the nature of the services provided was intermediary (agency-based), not direct religious service provision. Consequently, such activities were deemed travel bureau services subject to VAT.

This decision underscores the importance of examining the economic substance of transactions, rather than merely relying on the formal licenses or business status held by the taxpayer.

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