The cigarette industry in Indonesia significantly contributes to state revenue. Each cigarette is subject to three main levies: excise, cigarette tax, and Value Added Tax (VAT). This article details these levies and their legal basis.
Tobacco Products in Taxation Context
Cigarettes fall under tobacco products, defined by Excise Law and Ministry of Finance Regulation (PMK) No. 63/PMK.03/2022 on VAT for Tobacco Products. Tobacco products include cigarettes, cigars, leaf cigarettes, sliced tobacco, e-cigarettes, and other processed tobacco products.
Cigarette Excise
- Definition: State levy on specific goods with unique characteristics, such as tobacco products, based on retail price (HJE).
- Types:
- Specific Rate: Amount in rupiah per cigarette/gram for conventional cigarettes.
- Ad Valorem Rate: Percentage of base price for other processed tobacco, including e-cigarettes.
- Authority: Collected by the central government.
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Cigarette Tax
- Definition: Levy on cigarette consumption by provincial governments, collected with excise by the Directorate General of Customs and Excise (DJBC).
- Rate: 10% of cigarette excise, applied to various cigarette types.
Value Added Tax (VAT)
- Application: Tax on goods/services consumption, levied at each production/distribution stage. For tobacco, VAT is calculated based on a specific formula.
- Effective Rates:
- 9.9% of HJE: Effective from April 1, 2022, with an 11% VAT rate.
- 10.7% of HJE: Will apply when the VAT rate reaches 12%.
Conclusion
Each cigarette in Indonesia is subject to excise, cigarette tax, and VAT. These levies serve as state revenue sources and tools to control cigarette consumption for public health. Understanding this structure helps consumers and industry players recognize the financial contribution of each cigarette and its impact on market prices.
Indonesia Customs website here.
Collection of Indonesia customs consultations here.
Topic: Indonesian cigarette industry, cigarette excise, cigarette tax, VAT on cigarettes, tobacco products taxation, Indonesian excise law, Ministry of Finance Regulation, cigarette consumption control, state revenue from cigarettes, tobacco industry levies