Indonesia to Absorb VAT on Economy Flights for 60 Days to Lower Fares

In a move designed to alleviate the burden on travelers and stabilize the aviation sector, the Indonesian government has announced a temporary Value Added Tax (VAT) exemption for economy-class domestic flights. Finance Minister Regulation No. 24/2026 stipulates that the government will absorb the VAT on the base fare and fuel surcharge for a period of 60 days, starting from the day after the regulation's enactment. This fiscal intervention is particularly crucial as airlines grapple with escalating operational costs, largely driven by a significant increase in aviation fuel prices, which constitute approximately 40 percent of their total expenses.

Coordinating Ministry for Economic Affairs spokesperson Haryo Limanseto stated that the facility is intended to ensure the benefits are felt quickly and directly by passengers. This initiative is part of a broader strategy to maintain ticket affordability, bolster interregional connectivity, and ensure the sustainability of the national aviation industry in the face of global energy price volatility. Airlines are mandated to report their utilization of this VAT facility transparently, adhering to tax regulations. It is important to note that VAT will continue to apply to non-economy class flights.

This VAT exemption follows recent adjustments to fuel surcharges, which were increased through Transportation Minister Decree No. 83/2026. The cap on fuel surcharges was raised to 38 percent for both jet and propeller aircraft, a significant jump from previous rates. These combined measures reflect the government's commitment to mitigating the impact of rising costs on air travel, ensuring that essential connectivity remains accessible for citizens and supporting the economic ecosystem that relies on robust air transport. The government's proactive stance aims to balance the financial pressures on airlines with the need for affordable travel options for the Indonesian populace.

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This facility applies to ticket purchases and flights conducted within 60 days, starting one day after the regulation takes effect, so the benefits can be felt quickly and directly.