Collection of VAT on the delivery of agricultural products is an area that requires special attention and must be done carefully. The agricultural sector here includes agriculture, plantations, forestry, animal husbandry, fisheries, hunting, and captivity. Particularity and prudence are needed in collecting VAT because agriculture involves the livelihood of many people and many activities are carried out by people who tend not to keep books, which is a special problem in the administration of VAT. Moreover, it is understood that agriculture in many countries is difficult to handle and politically sensitive. 
 Tait, Alan: Value Added-International Practices and Problems, IMF, Washington D.C., 1988, hal. 141-142
Of course, agriculture is closely related to food as one of the basic needs of the people which is usually given tax facilities either exemption, subject to VAT at 0% or low/special rates, or even not subject to VAT. The provision of facilities under VAT itself requires caution or prudence, considering that all of these are related to the ideal goal of VAT, namely reducing taxes on taxes (cascading effect) which can distort neutrality, suppress tariff regressivity but remain within the framework of the adequacy of state revenues and simplicity of administration.
Thus knowing the treatment of VAT on agricultural products in Indonesia becomes an important and interesting thing. It is stated to be important because although the contribution of the agricultural sector to Gross Domestic Product is only around 13% , the agricultural sector concerns the lives of many people. It is called attractive due to the tendency of unsimplified treatment in relation to the purpose of VAT as mentioned above. For this reason, below is a description of the treatment of VAT on agricultural goods in Indonesia. In order to better understand the treatment, the presentation is not only about treatment based on the currently valid provisions, but also includes historical treatment since the VAT Law came into effect.
 Data for 2011, 2015 and 2019 from BPS submitted by the Fiscal Policy Agency in a Media Briefing on the Youtube channel Thursday, August 6, 2020.
The treatment of VAT on Agricultural Products at the beginning of the VAT Law applies
At the beginning of the implementation of VAT, which was based on Law No. 8 of 1983, Taxable Goods (BKP) only included processed (manufactured) goods. As a result, agricultural products that are not processed further are not included in the BKP. Activities of picking agricultural products, or raising animals and catching or keeping fish as well as drying or salting food are declared by law as not productive activities so that the results do not constitute BKP. Including those declared as activities to pick agricultural products, or raise animals and catch or raise fish and dry or
 Tait, Alan: Value Added-International Practices and Problems, IMF, Washington DC, 1988, p. 141-142
 Data for 2011, 2015 and 2019 from BPS submitted by the Fiscal Policy Agency in a Media Briefing on the Youtube channel on Thursday 6 August 2020.
salt food according to the Government Regulation Implementing the VAT Law (PP No. 22 of 1985) are:
Harvesting, picking, peeling, cleaning, sorting, skinning, chopping, cutting, assembling, drying and temporarily preserving agricultural, plantation and forestry products, whether done by hand or by other means.
Activities of maintaining, catching, sorting, skinning, cutting, milking or drying and temporarily preserving goods from livestock, fisheries and other marine products, whether done by hand or by other means.
Even the PP stated that the definition of processing does not include harvesting, peeling rice or beans, peeling and cleaning kapok/cotton from the skin/seed and heart of kapok/cotton; cutting and skinning logs, or animals into fresh meat in the form of small and large pieces whether frozen or not or coffee cherries into coffee beans; arranging flowers or fresh fruit; cleaning, peeling, drying and salting shrimp, frogs, fish, and other marine products or agricultural products as long as it is not done through a cooking process; sorting and chopping tobacco, onions, and cloves.
Thus, even though there has been a process of changing the shape, but as long as changing the shape is still included in the activities mentioned in the PP, the goods resulting from the transformation of these activities are still categorized as not BKP. This kind of treatment also means that the agricultural products do not distinguish between agricultural products in the form of basic needs or not, all of which are not BKP, except for agricultural products that have been processed other than the activities referred to by PP No.22 of 1985. By not being categorized as BKP, then the submission does not need to make a Tax Invoice as referred to in Article 13 of the VAT Law. Further,
VAT Treatment on Agricultural Products Period of the 2nd VAT Law (Law No. 11 of 1994)
Along with changes in the definition of BKP in Law no. 11 of 1994 which abandoned the manufacturing concept as a determinant of BKP or not, and replaced it with the Negative List concept for Non-Taxable Goods , the VAT treatment of agricultural products in Law no. 11 of 1994 began to separate agricultural products for basic needs that are needed by the people (hereinafter abbreviated as basic needs) and agricultural products, not for basic needs, even though both are still classified as Non-Taxable Goods as stated in the Elucidation of Article 4A of Law No. . 11 of 1994.
Agricultural products which are stapled goods in the explanation are only called rice, but in PP-50 of 1994 it is stated that grain, corn, sago, and soybeans are also
 Based on Article 4A of Law no. 11 of 1994 types of goods are not subject to tax stipulated by a government regulation.
 Based on Article 4A of Law no. 11 of 1994 types of goods are not subject to tax determined by a government regulation.
is a basic need. Meanwhile, other agricultural products which are included in goods that are not subject to tax according to PP-50 of 1994 are agricultural products that are directly picked, taken directly, tapped directly from the source. The details are contained in Article 4 which defines agricultural products in such a broad way with the sentence: ” Other crops that are not included in the items mentioned above”
Thus, even though the definition of BKP in Law no. 11 of 1994 no longer uses the concept of manufactured goods to determine BKP, agricultural products that have not been significantly processed are still categorized as non-BKP, so that their submission is not subject to VAT, and a Tax Invoice is not required.
VAT Treatment on Agricultural Products for the 3rd Period of the VAT Law (Law No. 18 of 2000)
In-Law no. 18 of 2000, starting with agricultural products which are basic needs and those that are not basic necessities, the VAT treatment will be separated in real terms. Agricultural products which are basic needs are still categorized as non-BKP (still regulated in Article 4A of the VAT Law), while agricultural products that are not necessities become BKP but are exempt from the imposition of VAT as regulated under Article 16B of the VAT Law.
Agricultural products which are staple goods in the third VAT Law period in the direct explanation of the Act are called rice, unhulled rice, corn, sago and soybeans. These types of goods are also mentioned again as basic necessities in PP-144 of 2000. Other agricultural products are exempted under PP-12 of 2001 but are limited to agricultural products produced from business activities in the fields of: a. agriculture, plantation, and forestry, b. husbandry, hunting, or capture, or captive breeding or c. fisheries, either fishing or aquaculture.
Furthermore, in the explanation of the PP, it is stated that agricultural products that are exempt from the imposition of VAT are agricultural products that are picked directly, taken directly, or tapped directly from the source including the processing results which are carried out by drying or other methods, chopping, salting diagrams, frozen or cooled, broken, washed or disinfected, soaked, boiled, sliced, peeled, split, ripened, carded, separated from the skin, or seeds or midrib, or packaged in a simple way to protect the goods in question which are handed over by Farmers or Farmers Groups.
Farmers are defined as people who carry out business activities in the fields of agriculture, plantation, forestry, animal husbandry, hunting, or catching, captive breeding, catching or aquaculture. Thus, agricultural products other than basic needs that are exempted from the imposition of VAT no longer mention the name of the goods, but only mention the collection and processing as well as the conditions for delivery, which are only carried out by farmers or groups of farmers. This means that even if the goods delivered are agricultural products other than basic necessities as described above, if the submitting is not a farmer, then it is still not exempt from the imposition of VAT.
Even though agricultural products have become BKP and upon their delivery are exempt from VAT, if the Farmer’s activity is solely to deliver agricultural products that are exempt from the VAT imposition, then the Farmer does not need to be confirmed as a Taxable Entrepreneur (PKP) . In the event that the Farmer’s sales exceed the Small Entrepreneur Limit, of course this provision deviates from the provisions of the VAT Law which stipulates that anyone who submits BKP must be confirmed as PKP, except for Small Entrepreneurs. Furthermore, upon submission of BKP by PKP, a Tax Invoice must be made. If the delivery is exempt from the imposition of VAT, then the Invoice includes a special serial number code for VAT exemption and is affixed with a statement that the VAT is exempted. However, this deviation from the provisions of the VAT Law is of course aimed at easing the administrative burden on Farmers, which is understandable considering that the administrative capacity of Farmers tends to be low.
In addition, PP-12 Year 2001 also does not exempt imports of agricultural products (as described above) other than necessities by anyone (including Farmers or Farmers Groups. Here it can be seen that domestic agricultural products other than necessities) the principal is protected (protected), although this method is certainly not following the principle of PPN neutrality. The treatment of exemption from agricultural products other than those which are basic necessities as regulated in PP-12 of 2001 continues even though the PP has been amended by PP-43 of 2002, and PP-46 of 2003.
Only since January 1, 2007, through PP-7 Year 2007 on imports of agricultural products other than those that are basic needs are also exempt from the imposition of VAT. In addition, domestic deliveries by non-Farmers or non-Farmers Groups are exempt from the imposition of VAT. Details of agricultural products that are released are stated in detail in Appendix PP-7 of 2007. After the issuance of PP-7 of 2007, the provisions for exemption from being PKP for Farmers who solely submitted agricultural products were canceled by PMK No.11/PMK.03 /2007. It seems that this change aims to align with the provisions of the VAT Law, although efforts to ease the administrative burden on Farmers have been abandoned.
What is interesting in the period of the third VAT Law is that it is unclear whether the VAT treatment for some agricultural products is not subject to VAT (not BKP for basic necessities) or is exempt from VAT for strategic goods. Rice and Grain are declared by law as not BKP, while rice is declared as strategic goods that are exempt from the imposition of VAT. Moreover, on the delivery of corn, it is clear that corn is declared as a staple item by law, but in PP-7 of 2007 it is also stated as a strategic item. Although this dualism of treatment for consumers has no financial effect (because both do not need to pay VAT), but for the party who submits (the seller) it can be administratively confusing. When it is declared that it is not BKP, the Seller should not need to make a Tax Invoice. When declared as BKP which is exempted from the imposition of VAT, the Seller still has to make a Tax Invoice
 Regulated in Article 6 KMK No.155/KMK.03/2001 jo. KMK No.371/KMK.03/2003
 Regulated in Article 6 KMK No.155/KMK.03/2001 jo. KMK No.371/KMK.03/2003
with invoice code 08. Mishandling the delivery of the goods is certainly risky. If an invoice is supposed to be made, but if the seller thinks the goods are not BKP and therefore does not make a Tax Invoice, then the seller will be penalized with a penalty of 2% of the Tax Imposition Basis (a not small amount). In practice, the seller finally decides for himself based on who the buyer is. If it is sold to a producer for further production processing, then the delivery is treated as a delivery that is exempt from VAT. Example: if corn is sold to an animal feed manufacturing company, it is treated as a delivery of strategic goods for which VAT is exempted. Meanwhile, if corn is sold for consumption, then the delivery is not subject to VAT.
VAT Treatment on Agricultural Products for the 4th VAT Law Period (Law No. 42 the Year 2009)
UU no. 42 of 2009 through its Elucidation (Article 4A) added the types of Non-BKP goods from agricultural products, namely:
meat, namely fresh meat that is not processed, but has gone through the process of being slaughtered, skinned, cut, cooled, frozen, packaged or not packaged, salted, limed, pickled, preserved in other ways, and/or boiled;
eggs, i.e. unprocessed eggs, including cleaned, pickled, or packaged eggs;
milk, namely dairy milk whether it has gone through a cooled or heated process, does not contain added sugar or other ingredients, and/or is packaged or not packaged;
fruit, namely fresh fruit that is picked, whether it has gone through the process of washing, sorting, peeling, cutting, slicing, graded, and/or packaged or unpackaged; and
vegetables, namely fresh vegetables that are picked, washed, drained, and/or stored at low temperatures, including chopped fresh vegetables.
With this addition, the dualism of VAT treatment on the delivery of some agricultural products is increased, namely the delivery of meat, eggs, milk and vegetables. For the delivery of these goods by the Law (the explanation) it is declared that they are not subject to VAT (because they are not BKP), but PP-31 of 2007 – which has not been revoked when the New Law is enacted – is declared exempt from the imposition of VAT.
Amid this dualism, an interesting event occurred, namely the existence of a Material Test by Kadin to the Supreme Court related to the release of the surrender of agricultural goods. Kadin is of the opinion that only basic necessities should not be subject to VAT. Apart from basic necessities, VAT exemptions should not be granted. According to Kadin, agricultural goods that are not necessities should be subject to VAT. Kadin further reasoned that with the release of agricultural products, the Plantation Company, which is also a producer of plantation derivatives (eg palm oil) will experience competitive pressure because the input VAT in relation to the production of agricultural products (which will be used in the next production process) will not be eligible. credited to increase the cost of production of derivative/final agricultural goods. The Supreme Court finally granted Kadin’s request, so that the delivery of agricultural products other than basic necessities was not exempt from VAT.
 Supreme Court Decision Number 70 P/HUM/2013
 Supreme Court Decision Number 70 P/HUM/2013
In response to this Supreme Court Decision, the Government issued SE-24/PJ/2014 which contains:
Agricultural products in the form of fruits and vegetables as stipulated in the Attachment of Government Regulation Number 31 of 2007 including goods that are not subject to VAT (Not Taxable Goods) following Article 4A paragraph (2) letter b of the VAT Law so that upon delivery, both imports and exports are not subject to VAT
Other agricultural products that are not stipulated in the Attachment to Government Regulation Number 31 of 2007, namely rice, unhulled rice, corn, sago, and soybeans are goods that are not subject to VAT (Not Taxable Goods) by Article 4A paragraph (2) letter b of the Law. VAT so that the delivery, import, or export is not subject to VAT
Agricultural products which are plantation products, ornamental and medicinal plants, food plants, and forest products as stipulated in the Appendix to Government Regulation Number 31 of 2007 which were originally exempt from the imposition of VAT are changed to be subject to VAT so that their delivery and imports are subject to VAT at a rate of 10%, while the export is subject to VAT at a rate of 0%
In connection with letter c above, Entrepreneurs (individuals or entities) who deliver the agricultural products are required to collect VAT and for that they must be confirmed as a Taxable Entrepreneur, except for entrepreneurs who are small entrepreneurs with a turnover of up to Rp. 4.8 billion. per year as regulated in the Regulation of the Minister of Finance Number 197/PMK.03/2013 concerning Amendments to the Regulation of the Minister of Finance Number 68/PMK.03/2010 concerning Limits for Small Entrepreneurs Value Added Tax.
Item b is actually less in line with reality, because corn is contained in Appendix PP-31 of 2007.
After that, another judicial review took place, namely an application to the Constitutional Court (MK) for an explanation of the VAT Law which limits the types of goods classified as necessities. The Petitioner for the Material Test questioned the exclusion of Fish and Nuts as basic necessities on the grounds that the goods became more expensive as a result of being subject to VAT. The Government as the Respondent maintains that the Fish and Nuts are no longer subject to VAT because the VAT has been waived based on the PP. The Constitutional Court finally granted the Petitioner’s request by deciding that the explanation of the VAT Law was contrary to the 1945 Constitution as long as it was interpreted that basic necessities include the extent stated in the explanation. As a result, fish and nuts must be declared as staple goods that are not BKP.
Soul with the problem of limited basic necessities which are only mentioned in PMK No. 116/PMK.10/2017, the PMK was also submitted for a Material Test to the Supreme Court (MA) which questioned the exclusion of fish and nuts as basic necessities. Similar to the Constitutional Court, the Supreme Court also granted the Material Test. 
 Constitutional Court Decision Number 39/PUU-XIV/2016
 Supreme Court Decision Number 32 P/HUM/2018
 Constitutional Court Decision Number 39/PUU-XIV/2016  Supreme Court Decision Number 32 P/HUM/2018
The Government’s response to the granting of the request for a judicial review of PMK No.116/PMK.10/2017 by the Supreme Court was the issuance of PMK No. 99/2020 which mentions Fish as a Basic Necessity Goods. Even so, in PP-48 of 2020 concerning VAT on the Delivery of Strategic Goods, fish is still declared as Strategic Goods. In other words, the dualism of treatment between not being subject to PP (because it is not BKP) and being exempted from VAT (because of BKP) continues. Likewise, corn which in PMK No. 99/2020 is referred to as a staple item, but in PP-48 of 2020 it is stated as BKP which is exempt from the imposition of VAT.
The follow-up response to the granting of the Material Test by Kadin to PP-31 Year 2007 was the issuance of PMK No.89/2020 which regulates the use of other values for the delivery of certain agricultural products (again, corn is included). Another value of 10% as DPP can be chosen by the party who submits certain agricultural products. On the delivery of certain agricultural products by Entrepreneurs using other values to the Industrial Business Entities that carry out processing, VAT is collected by the said Industry. With this provision, it is hoped that the interests of entrepreneurs who are palm oil producers who also have oil palm plantations and the interests of entrepreneurs who are solely oil palm planters can both be fulfilled. For Palm Oil producing Entrepreneurs who also own oil palm plantations will not be subject to non-recognition of input tax on the acquisition of goods related to the production of Oil Palm Fresh Fruit Bunches (FFB), because their use of FFB for the production of palm oil is a taxable delivery which is subject to tax. which on the other hand is classified as self-use for productive purposes, so there is no need to make a tax invoice as regulated by PP-1 2012. Entrepreneurs who are only planters of certain agricultural products, on the other hand, do not need to be bothered with the administrative obligations of input taxes, because they can use another value. The problem is that when the planter submits it to the processing industry, the payment for the delivery is levied with VAT by the processing industry.
From the description above, it can be seen that the VAT treatment on the delivery of agricultural products has dynamics that are not simple. In the first two VAT laws (when all agricultural products are still categorized as non-BKP) there has not been a dualism between some agricultural products as basic necessities that are not subject to VAT and those that are exempt from VAT. Since the third VAT Law until now, this dualism has occurred. In addition, the extent of interest that occurs about agriinral products has also led to several material trials of existing regulations. Even the Judiciary Institution granted the request for the Material Examination, so that inevitably the Government had to redesign the regulations that had been issued.