VAT Exemptions on Connection Fees or Installation Charges and Fixed Charges of Clean Water

s Khisi Armaya Dhora
s Awwaliatul Mukarromah
By Khisi Armaya Dhora, Awwaliatul Mukarromah
Khisi Armaya Dhora
Awwaliatul Mukarromah
President Joko Widodo has officially exempted Value Added Tax (VAT) on the connection fees or installation charges and fixed charges of clean water. The exemption is outlined in Government Regulation No. 58 of 2021 concerning Amendments to Government Regulation No. 40 of 2015 concerning Supplies of Clean Water which are Exempted from Value Added Tax (Gov. Reg. 58/2021).
 
Clean water connection fees or installation charges refer to the connection fees or installation charges that are billed by the entrepreneur to the customer for the activity of connecting the entrepreneur’s water installation to the customer’s water installation. In contrast, fixed charges of clean water refer to the fees charged by the entrepreneur to the customer, the amount of which is not affected by the volume of water usage.
 
VAT exemptions on clean water connection fees or installation charges and fixed charges revise provisions formerly outlined under Government Regulation No. 40 of 2015 concerning Supplies of  Clean Water which are Exempted from Value Added Tax (Gov. Reg. 40/2015).
 
Formerly, the VAT exemptions were only granted for supplies of clean water by entrepreneurs, either not ready to drink or ready to drink clean water. Under the new regulation, VAT exemptions are currently given for supplies of clean water that is not ready to drink and/or ready to drink, including clean water connection fees or installation charges and fixed charges.
 
Similar to the previous provisions, however, the VAT exemptions on ready-to-drink clean water are not granted for bottled drinking water. Bottled drinking water refers to water that has been subject to special treatment and is packaged in bottles or other packages and meets the requirements for drinking water (refill drinking water).
 
Promulgated on 7 April 2021, Gov. Reg. 58/2021 has come into force thereafter. Objects exempted from VAT have been expanded because clean water constitutes one of the basic needs in life. As such, VAT exemptions are given to ensure the availability of clean water.