Government Prepares VAT Exemption Options for Outsourcing in Textile Industry

The government is preparing several incentives to encourage the strengthening of the textile and textile products (TPT) industry. The options being reviewed include the simplification or exemption of Value Added Tax (VAT) on the use of outsourcing services.

Coordinating Minister for Economic Affairs Airlangga Hartarto stated that labour-intensive industries, such as textiles and footwear, have production characteristics that depend on changes in export demand. He cited varying demand levels across seasons in Europe and America, which experience four distinct seasons.

“Labour-intensive industries usually engage in outsourcing when their contracts increase or decrease,” Airlangga said when met at his office on Friday (2/9/2026).

“Orders for summer, winter, and fall are not the same. Therefore, they require outsourcing,” he added.

According to him, this condition allows companies more flexibility in managing their contracts. To support this, the government intends to implement simplifications from a taxation perspective.

“Usually, for entrepreneurs in both special economic zones and non-zones, there are taxes, particularly VAT. We intend to simplify this so that the industry remains competitive,” said Airlange.

On that occasion, Airlangga confirmed that one of the facilities being studied is the VAT exemption. However, this policy is still in the preparation stage.

“It is still under discussion, and certainly, the regulations are being prepared, including the Minister of Finance Regulation (PMK),” he said.