Government reviews VAT adjustments for fixed-term contracts in textile industry

The Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the government is reviewing regulatory adjustments related to Value Added Tax (VAT) for workers on fixed-term employment contracts (PKWT) used within the textile and garment industries.

He noted that the need for such adjustments arises because the textile and garment industries require labour flexibility to meet seasonal orders.

“The textile and garment industries require variation in their use of labour, particularly PKWT, especially when handling orders that follow a four-season cycle, where demand naturally differs each season,” Airlangga said at the Presidential Palace Complex in Jakarta on Tuesday.

According to him, labour requirements in the industry can shift according to market demand, necessitating regulations that are more aligned with the industry’s specific characteristics.

“Therefore, there needs to be an adjustment regarding PKWT needs. We also mentioned that if outsourcing is conducted through companies to assist with this from abroad, no taxation will be applied,” he explained.

Furthermore, Airlangga stated that President Prabowo Subianto has requested the government to find the appropriate regulations regarding the imposition of VAT within the PKWT scheme.

In addition to labour issues, the government is also evaluating taxation policies for export-oriented textile and garment industries.