Procedures for Calculating and Collecting Value Added Tax on the Delivery of Certain Liquefied Petroleum Gas (Elpiji)
- February 11, 2021
- Posted by: Administrator
- Category: Tax News

The Ministry of Finance (MoF) issued Regulation Number 220/PMK.03/2020 on 28 December 2020, regarding the procedures for Calculating and Collecting Value Added Tax on the Delivery of Certain Liquefied Petroleum Gas. The regulation has been effective starting from that date.
Liquefied Petroleum Gas, hereinafter abbreviated as LPG, is a hydrocarbon gas liquefied by pressure to facilitate storage, transportation, and handling which basically consists of propane, butane, or a mixture of both. Certain LPG is LPG which has a specificity due to certain conditions such as user/usage, packaging, volume and/or price that still needs to be subsidized.
The Regulation governs the following points:
- The delivery of Certain LPG by a Taxable Entrepreneur is subject to VAT;
- The Government shall bear the VAT on the delivery of Certain LPG for the portion of price subsidized by the Government;
- The Buyer shall be liable to pay VAT on the delivery of Certain LPG for the portion of the price that is not subsidized by the Government.
The VAT payable on the delivery of Certain LPG that needs to be paid by the Buyer shall be calculated based on Other Value of VAT imposition (“Other Value”).
Other Value to be used in calculating the VAT payable will vary based on the point of delivery of certain LPG:
- From Company to Agent à The VAT Base is 100/110 of the Retail Price;
- From Agent to Sub Agentà The VAT Base is 10/101 of the excess between the Agent’s Selling Price and the Retail Price; or
- From Sub Agent to Customer à The VAT Base is 10/101 of the excess between the base selling price and the agent’s selling price.
The Value Added Tax payable is 10% (ten percent) from the VAT Base as mentioned above.
Due to the above calculation of VAT base on delivery of certain LPG, the treatment of the Input VAT related to the delivery of certain LPG shall be as follows:
- For a Company with LPG Business License à input VAT can be credited;
- For LPG Agent and Sub Agent à input VAT cannot be credited.
Timing for the issuance of VAT Invoices:
- LPG licensed company should issue a VAT invoice for the VAT on the portion of price subsidized by the Government at the time when the Company files a request to the Government for payment of subsidy;
- LPG licensed company, agent, and sub agent should issue a VAT invoice at the time of delivery or payment of Certain LPG, whichever comes first.
The impacts of this regulation are as follows:
- Agents and Sub Agents will be required to register as VATable Entrepreneurs at the Tax Office if their delivery of Certain LPG exceeds Rp. 4.8 billion in a given year.
- As a registered VAT entrepreneur, they will be required to administer monthly VAT obligations, i.e. issuing VAT invoices and preparing and filing monthly VAT returns.
- There should be no impact on the retail price of certain LPG, since the retail price already includes VAT.