Jakarta. The textile industry is bracing for further hardship as a planned increase in Value Added Tax (VAT) to 12 percent takes effect in January 2025, potentially exacerbating an already difficult situation.

Danang Girindrawardana, Executive Director of the Indonesian Textile Association (API), criticized the government's seeming indifference to the struggles of the textile and garment industries, which have been in decline for the past three years. This downturn has led to significant job losses, with nearly 200,000 workers laid off during this period.

"Over the past three years, we've seen a dramatic decline in the textile industry, as evidenced by the layoffs. Almost 180,000 to 200,000 workers have been dismissed from the textile and garment sectors," Danang said in an interview with Investor Market Today IDTV on Friday.

Danang also pointed out that in 2024 alone, nearly 38,000 workers have lost their jobs in this labor-intensive industry. He stressed that the government should view this as a serious warning, as the impending VAT hike could further jeopardize the industry’s survival in the coming year.

"The impact will certainly be felt. We have already raised this concern at the association level, and all our member businesses, including garment manufacturers, are dissatisfied with the timing of this implementation," Danang explained.

The government has confirmed that the VAT hike will proceed as scheduled on January 1, 2025, in line with the 2021 Tax Law. The decision was reaffirmed by the House of Representatives (DPR) after a meeting with President Prabowo Subianto at the Presidential Palace on Thursday.

Chairman of the DPR’s Commission XI, Mukhamad Misbakhun, clarified that the VAT increase will primarily affect luxury goods consumers, while lower-income groups will continue to pay the current VAT rate.

"Small businesses and consumers will continue to pay the same VAT rates as before," Misbakhun said during a press briefing at the Presidential Palace complex.

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