Problems Regarding Value Added Tax Exemption Under Section 81 (1) (e) of the Revenue Code: In the Case of the Sale of Pharmaceutical or Chemical Products Used on Plants or Animal for Nourishing, Preventing, Destroying, or Eliminating Pesticide or Disease of Plants and Animals

Abstract

This academic article aims to analyze the problem of VAT exemption under Section 81 (1) (e) of the Revenue Code in the case of the sale of pharmaceutical or chemical products used on plants or animal for nourishing, preventing, destroying, or eliminating pesticide or disease of plants and animals, as well as to analyze the advantages and disadvantages of collecting VAT and exempting VAT as mentioned above, by using the principles of VAT collection and VAT exemption as a framework for analysis in order to find a solution to the Revenue Code. The results of the analysis found that although the government intends to exempt VAT for the sale of pharmaceutical or chemical products used on plants or animal for nourishing, preventing, destroying, or eliminating pesticide or disease of plants and animals in order to facilitate and reduce costs for farmers, the effect of such VAT exemption is that businesses have a burden of operating costs or expenses from input tax that cannot be refunded, the operating results and corporate tax of such businesses do not reflect reality, and the VAT system is broken in the chain.Therefore, the solution should be to abolish the VAT exemption under Section 81 (1) (e) of the Revenue Code because abolishing the VAT exemption will cause the sale of pharmaceutical or chemical products used on plants or animal for nourishing, preventing, destroying, or eliminating pesticide or disease of plants and animals to be affected. Destroying or eliminating pests or diseases of plants and animals registered for Value Added Tax (VAT) allows for a refund of input tax incurred from business operations. This eliminates the hidden, non-refundable input tax burden from operating costs and expenses, unlike cases where VAT is exempt. Consequently, the business's profit and loss statements reflect the true picture, and the VAT system becomes more complete. Furthermore, eliminating this problem generates additional revenue for the government for national administration.