Government Evaluates VAT on Textile and Garment Sectors

JAKARTA, DDTCNews - The government is evaluating the application of value added tax (VAT) on Indonesia's textile sector.

Coordinating Minister for Economic Affairs, Airlangga Hartarto, said the government is preparing VAT policy for workers engaged under fixed-term employment agreements (perjanjian kerja waktu tertentu/PKWT in Indonesian) as well as for export-oriented textile and garment industries.

"The President [Prabowo Subianto] has also stated that regarding VAT related to PKWT, we will formulate the appropriate regulation and we have also conveyed matters relating to export-oriented garments and textiles," said Airlangga, as quoted on Wednesday (23/9/2026).

An evaluation of the VAT provisions concerning employees on PKWT status is necessary given that the textile and garment industry frequently requires additional workers of PKWT status to handle order surges during certain seasons.

Airlangga said the sector's labour requirements could increase further in response to demand from countries with four distinct seasons.

"The textile and garment industry requires flexibility in its use of labour, particularly PKWT workers, in handling orders that follow a four-season cycle. Each season naturally brings different demand," said Airlangga.

Moreover, VAT policy will also be evaluated to support export-oriented textile and garment industries. "Regarding export-oriented garments and textiles, a request has been made for the Ministry of Finance (MoF) to evaluate the applicable VAT," said Airlangga.

Apart from VAT policy, the government is also reviewing technical regulations as well as various other regulations to support the needs of the textile and garment industry. The government will also tighten customs surveillance to prevent the entry of used clothing in ballpress form.

"Specifically for the downstream segment, namely garments, where disruptions occur through kilogramme-based imports or ballpress imports. The Directorate General of Customs and Excise (DGCE) has also been requested to address this promptly, as it is severely disrupting domestic garment producers," said Airlangga. (dik)