Legal Certainty of Input Tax Credit on Taxable Goods for the Production of Fresh Fruit Bunches in Integrated Companies

Abstract

This study examines the imposition of Value Added Tax (VAT) and the crediting of input tax on taxable goods used to produce Fresh Fruit Bunches (FFB) in integrated palm oil companies. The research is motivated by a tax dispute reflected in Tax Court Decision Number PUT-71015/PP/M.VIA/16/2016 in conjunction with Supreme Court Decision Number 1731 B/PK/PJK/2025. A normative juridical method with descriptive specification was employed, drawing on legislation, court decisions, and academic literature. The findings indicate that FFB produced by the plantation unit is not transferred to external parties, but is directly utilized as raw material in the internal production process to yield Crude Palm Oil (CPO) and Palm Kernel (PK). The transfer of FFB from the plantation unit to the processing unit does not constitute a taxable delivery under the VAT Law; thus, the VAT exemption provision is inapplicable. The equal treatment principle cannot be uniformly applied between non-integrated and integrated palm oil companies, as both operate under fundamentally different business structures. The Supreme Court affirmed that input tax in integrated palm oil companies is creditable. This study recommends the enactment of more comprehensive regulations to prevent interpretive disputes between taxpayers and tax authorities.