Govt to Review VAT Incentives on Outsourcing for Textile Industry
JAKARTA, DDTCNews - Coordinating Minister for Economic Affairs, Airlangga Hartarto, has stated that the government plans to provide value added tax (VAT) facilities for the use of outsourcing services by the textile and textile products (tekstil dan produk tekstil/TTP in Indonesian) industry.
Airlangga did not elaborate further on the VAT facilities the government intends to prepare. He only noted that the policy concept is still being discussed at the ministerial level.
"So that [the plan] is an incentive related to outsourcing. Because, for example, in the textile industry they have uneven production cycles," he said, as quoted on Thursday (24/9/2026).
Airlangga explained that the domestic TTP industry has a production cycle that is often uneven throughout the year. This is because the volume of textile or garment production depends on the number of orders received.
Further, he added, export-oriented TTP industries tend to receive a surge of orders from four-season countries during winter, summer, autumn/fall and spring.
"Because for export-oriented industries there are winter, summer, autumn and fall orders. Production volumes are usually uneven at those times, so when volumes are uneven, [the industry] engages in outsourcing," said Airlangga.
According to Airlangga, textile factories typically recruit additional workers from labour outsourcing service providers. These additional workers are needed when orders surge.
In view of the current state of the TTP industry, the government considers it necessary to provide VAT facilities on labour outsourcing services for local textile factories.
"When production volumes are uneven, there is outsourcing. Now, when the industry partly operates by [recruiting] outsourced workers, that is currently being discussed for the VAT to receive facilities," Airlangga explained.
However, Airlangga did not disclose the specific scheme of the VAT facilities in question; whether it would involve a VAT exemption exclusively for the TTP industry or relief in some other form.
In addition, the government also plans to evaluate the VAT policy for export-oriented textile industries. Airlangga stressed that this tax policy concept must first be discussed with the Minister of Finance.
"Further, export-oriented industries usually request refunds. Now, prompt processing of the refunds is being requested. This has already been discussed with the Minister of Finance," said Airlangga.
On another note, the government, through Government Regulation (Gov. Reg.) 49/2022, provides facilities in the form of VAT exemption on outsourcing services. Labour outsourcing services are services provided by a service provider to supply workers to a service user.
Please note that Article 22 paragraph (5) of Gov. Reg. 49/2022 stipulates that there are 4 criteria that must be fulfilled for labour outsourcing services to be classified as taxable services (jasa kena pajak/JKP in Indonesian) that are exempt from VAT. (rig)