Cigarette Tax in Indonesia: Rate, Taxable Object, Tax Subject, and Collection Mechanism

Cigarette tax and cigarette excise are often considered to be the same levy, even though they have different legal bases, characteristics, and collection purposes. Excise is a state levy imposed on certain goods with specific characteristics as regulated under excise legislation. Cigarette Tax, on the other hand, is a provincial-level regional tax calculated based on the amount of cigarette excise determined by the central government.

Within Indonesia's central and regional financial relations system, Cigarette Tax is one of the taxes under the authority of provincial governments. The tax illustrates the connection between the excise system administered by the central government and the regional tax system, the proceeds of which are allocated to regional governments.

Definition of Cigarette Tax

Law No. 1 of 2022 on Financial Relations between the Central Government and Regional Governments defines Cigarette Tax as a levy imposed on cigarette excise collected by the central government.

Accordingly, the basis for calculating Cigarette Tax is not the retail selling price of the cigarette itself, but the amount of excise imposed on the relevant cigarette product.

Cigarette Tax is a regional tax collected under a self-assessment mechanism. As part of the administrative process, taxpayers submit a Cigarette Tax Return containing accurate and complete information in accordance with the applicable requirements.

Difference between Cigarette Tax and Cigarette Excise

The most fundamental distinction lies in the nature of the levy.

Cigarette excise is a state levy imposed on excisable goods and administered by the central government through the Directorate General of Customs and Excise.

Cigarette Tax, by contrast, is a provincial regional tax calculated based on the amount of cigarette excise.

As a result, a single cigarette product may be subject to both excise and Cigarette Tax.

Excise is first imposed in accordance with the rules governing excisable goods, after which the Cigarette Tax is calculated using the amount of excise as its tax base.

Taxable Object and Tax Subject

The taxable object of Cigarette Tax is cigarette consumption.

The scope of cigarettes includes cigarettes, cigars, leaf cigarettes, and other forms of cigarettes that are subject to excise.

Electronic cigarettes are also included within the category of other forms of cigarettes subject to Cigarette Tax insofar as they meet the requirements applicable to excisable goods.

Cigarettes that are not subject to excise under the applicable excise legislation are excluded from the scope of Cigarette Tax.

Accordingly, whether a product constitutes a taxable object for Cigarette Tax purposes is closely linked to its treatment under the excise regime.

The tax subject is the cigarette consumer.

The taxpayers, however, are cigarette factory operators or producers and cigarette importers holding an Excisable Goods Entrepreneur Identification Number, known as an NPPBKC.

Although the consumer is the tax subject, the administrative obligations relating to payment and reporting rest with the business operators designated as taxpayers.

Cigarette Tax Rate

The tax base for Cigarette Tax is the amount of excise imposed by the government on cigarettes.

Under Law No. 1 of 2022, the Cigarette Tax rate is set at 10% of cigarette excise.

The amount of Cigarette Tax payable is calculated by multiplying the tax base by the 10% rate.

For example, if the excise imposed on a cigarette product is IDR 20,000 per pack, the Cigarette Tax payable is IDR 20,000 x 10%, or IDR 2,000.

Accordingly, Cigarette Tax is not calculated directly from the retail selling price but follows the amount of excise that serves as the tax base.

Collection of Cigarette Tax

The technical rules governing the collection of Cigarette Tax are regulated, among others, under Minister of Finance Regulation No. 26 of 2026.

Collection is carried out by the Customs and Excise Office together with the collection of cigarette excise.

This mechanism integrates Cigarette Tax administration with the excise service process.

The taxpayer calculates the amount of Cigarette Tax payable and records it in the Cigarette Tax Return, or Surat Pemberitahuan Pajak Rokok (SPPR).

The SPPR is submitted to the head of the Customs and Excise Office together with the CK-1 document through the applicable excise system.

If the system experiences a disruption, the documents may be submitted in writing through the Customs and Excise Office.

Once the SPPR has been received, Customs and Excise officials review the document.

The review includes the completeness and accuracy of the SPPR, consistency between the SPPR and CK-1 data, and the accuracy of the Cigarette Tax calculation.

If the document is found to be complete and correct, it is assigned a registration number and date.

Where information is incomplete or inconsistent, the taxpayer is required to make the necessary corrections before the process continues.

Payment and Receipt

After obtaining a registration number and date, the taxpayer pays the Cigarette Tax and cigarette excise into the State General Treasury Account.

Payment is made through a collecting agent using a billing code issued by the Directorate General of Customs and Excise through the billing portal.

Following payment, the collecting agent issues a State Revenue Receipt or Bukti Penerimaan Negara (BPN).

Customs and Excise officials then review the BPN, the consistency of the information between the SPPR and CK-1, and the accuracy of the amount of Cigarette Tax paid.

Where payment is confirmed as correct, the CK-1 service process may proceed.

Conversely, where the Cigarette Tax has not been paid, an application for the provision of excise stamps for a subsequent period may not be processed until the outstanding obligation has been settled.

Underpayment of Cigarette Tax

An underpayment of Cigarette Tax may arise, among other things, from an excise underpayment, an incorrect calculation in the SPPR, or Cigarette Tax that has not been fully paid.

In such circumstances, the head of the Customs and Excise Office may issue a notice of underpayment to the taxpayer.

The taxpayer must settle the Cigarette Tax underpayment no later than 30 calendar days from the date on which the notice is delivered.

Accuracy in completing the SPPR and reconciling it with the relevant excise documents is therefore an important part of maintaining administrative compliance.

Distribution to Regional Governments

Although Cigarette Tax is collected through the central government system, it constitutes provincial regional revenue.

Cigarette Tax collected is transferred to the provincial Regional General Treasury Accounts proportionally based on population in accordance with the mechanism prescribed by applicable laws and regulations.

This arrangement demonstrates how Cigarette Tax functions as a fiscal instrument connecting revenue derived from cigarette consumption with the funding capacity of regional governments.

Because it is collected together with excise, the system is also intended to simplify collection and reduce duplication of administrative processes.

Closing

Cigarette Tax is a provincial regional tax that is distinct from cigarette excise, even though the two are collected through closely connected mechanisms.

The Cigarette Tax rate is set at 10% of the amount of cigarette excise, with consumers acting as tax subjects and certain producers or importers acting as taxpayers.

Compliance with Cigarette Tax obligations requires accuracy in calculating the tax, submitting the SPPR, making payments through the Customs and Excise system, and retaining evidence of payment.

For producers and importers, compliance with these procedures is particularly important because an underpayment can directly affect the provision of excise services in subsequent periods.