Complying with Sharia While Exemptinfrom Value-Added Tax: Murābaḥah in Indonesian Islamic Banks

Abstract

Law number 42/2009 on Value Added Tax and some subsequent amendments have exempted Islamic banks from the value-added tax on their murābaḥah transactions. This provision raises the sharia issue because the goods are delivered directly from the supplier to the customer. At the same time, the DSN-MUI Fatwa regarding the murābaḥah contract sets that banks must first buy and own the goods from the suppliers before selling them back to the customers. With this tax provision, murābaḥah transactions have shifted from trade systems to service ones because banks directly transfer funds to customers to purchase goods. Such tax policy has dealt with the so-called double taxation issue of Islamic banks but sacrificed the compliance of sharia principles. This paper seeks to solve this dilemma by proposing a revision of tax regulations for murābaḥah transactions using philosophical, juridical, and sociological legal approaches. The delivery of goods from suppliers to banks and from banks to customers is included in non-taxable goods transactions for Islamic banks. With this proposal, Islamic banks are expected to be exempted from value-added tax while complying with sharia principles and competing with conventional banks.