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VAT hike to push F&B prices up 3%, association says
Gapmmi has warned that the 12 percent VAT rate starting on Jan. 1 is likely to end up passing increased supply chain costs onto consumers.
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A woman shops for dairy products on July 5, 2024, at a supermarket in South Tangerang, Banten. (Antara/Sulthony Hasanuddin)
T
he Indonesian Food and Beverage Association (Gapmmi) says the impending increase to the value-added tax (VAT) rate from 11 to 12 percent will translate into a price hike of up to 3 percent for consumers.
Gapmmi head Adhi S. Lukman said the planned VAT hike, which is to take effect on Jan. 1, 2025, would affect the entire food and beverage (F&B) supply chain, from materials to packaging, ultimately leading to an increase in the prices of finished goods.
“Since there is a margin for each link [in the supply chain], the [costs] will accumulate. At the consumer level, based on my estimate [prices] will increase around 2 to 3 percent as a result of the VAT hike,” said Adhi, as quoted by Kompas.com.
He added that F&B firms were concerned that the VAT hike would trigger a decline in sales, though he had no projected figures.
However, Adhi said any impact on demand might be mitigated somewhat by the timing of the VAT hike, since it would come some two months ahead of the start of Ramadan.
Given that demand was typically strong during the Ramadan-Idul Fitri holiday season, which falls in February-March next year, he expected consumers would still head to the shops.
“I think when it comes to primary foodstuffs, consumers will probably buy some anyway, but for secondary, tertiary [food products], those that are not staples, this is what we’re concerned about,” said Adhi.
