Indonesia’s textile sector warns against VAT hike amid rising challenges

The Indonesian textile industry is bracing for further challenges as the government’s planned value-added tax (VAT) increase from 11 to 12 per cent takes effect on January 1st. Industry leaders warn the additional costs incurred by producers will inevitably be passed on to consumers, impacting purchasing power and potentially leading to a decline in domestic consumption.

Redma Gita Wirawasta, Chairman of the Indonesian Fibre and Filament Yarn Producers Association (APSyFI), expressed concerns that the VAT hike will further strain the already struggling textile and textile product (TPT) industry. He suggested that the government should postpone the increase and focus on improving tax collection efficiency to boost state revenue.

Jemmy Kartiwa Sastraatmaja, Chairman of the Indonesian Textile Association, echoed these sentiments, emphasizing the potential negative impact on consumer purchasing power. He urged the government to reconsider the VAT hike and prioritize addressing the issue of illegal TPT imports, which offer cheaper alternatives and could further erode the market for domestic producers.

The textile industry is facing a perfect storm of challenges, including rising production costs, weak consumer demand, and unfair competition from illegal imports. The VAT hike, if implemented, could exacerbate these issues and hinder the industry’s recovery.