Jakarta. Finance Minister Sri Mulyani Indrawati announced on Monday that certain essential commodities and services will remain exempt from value-added tax (VAT), even as the standard VAT rate increases to 12 percent starting January 1.

The tax-free items include basic food staples such as rice, meat, fish, eggs, vegetables, and fresh milk. Additionally, education services, healthcare, public transportation, low-cost housing, and drinking water will also be exempt.

“The government and the House of Representatives have decided not to levy VAT on essential commodities needed by the public. The estimated cost of this policy is Rp 265.6 trillion ($16.6 billion),” Sri Mulyani said during a joint press conference with other economic ministers in Jakarta.

Meanwhile, certain other commodities, including wheat flour, industrial-use sugar, and the government-sponsored cooking oil brand "Minyak Kita," will continue to be taxed at the current VAT rate of 11 percent, she added.

The new 12 percent VAT rate will primarily apply to luxury goods and products intended for wealthier consumers. Premium services such as VIP hospital care and international-standard education will also be subject to the higher VAT rate, according to the finance minister.