Gov’t Provides Tax Incentive to Strengthen Automotive Industry

By Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation     Date 1 Maret 2021
Category: News
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Minister of Industry Agus Gumiwang Kartasasmita. Photo by: PR of Ministry of Industry

The Government has announced that it provides fiscal incentive to reduce tariff of the Government-borne luxury goods sales tax (PPnBM DTP).

The policy aims to increase the purchase and production of vehicles and accelerate the national economic recovery.

The tariff reduction is stated in the Decree of Minister of Industry Number 169 of 2021 on Motor Vehicles with Sales Tax on Luxury Goods for the Delivery of Taxable Goods Classified as Luxury to be borne by the Government in Fiscal Year 2021.

“The Ministerial Decree aims to determine motor vehicles that can receive the tax incentive based on Minister of Finance Regulation Number 20 of 2021,” Minister of Industry Agus Gumiwang Kartasasmita said, quoted in a release from Ministry of Industry, Monday (01/03).

The Minister stated that motor vehicles that can obtain the tax incentive must comply with the local content requirements.

The Decree also stipulates that there are 115 types of components that can be included in the calculation of the local content.

The vehicle variants covered in the Decree include products from six companies, namely PT Toyota Motor Manufacturing Indonesia, PT Astra Daihatsu Motor, PT Mitsubishi Motors Krama Yudha Indonesia, PT Honda Prospect Motor, PT Suzuki Motor Indonesia, dan PT SGMW Motor Indonesia.

“In the Ministerial Decree, it is stated that industrial companies are required to submit a local purchase plan and a statement letter on the utilization of local purchases in production activities,” Agus said.

The companies are also required to submit tax invoices in accordance with the provisions of laws and regulations, the PPnBM DTP realization reports, and quarterly sales performance.

“The implementation of monitoring and evaluation can be carried out in collaboration with Government agencies in the field of taxation and/or by involving independent verification agencies,” he added.

For companies that do not carry out local purchases, Ministry of Industry will propose the imposition of administrative sanctions in accordance with the provisions of laws and regulations and the termination of tax facilities.

Agus expressed hope that the stimulus will reduce the price of domestically produced motor vehicles so that they are more affordable to the public and increase competitiveness against imported vehicles.

In addition, it can also increase the production performance of four-wheeled motorized vehicles to more than one million units in 2021.

The data of Ministry of Industry shows that the automotive industry is one of the mainstay sectors that provide significant contribution to the national economy.

Currently, there are 22 factories with the support of 1,500 component industries (tier 1, 2, and 3) and more than 1.5 million people working along the industry’s value chain.

The automotive sector is able to contribute 10 percent to the GDP of the industrial sector, or 25 percent to the GDP of the industrial sector if it includes the motorized vehicle ecosystem.

The tax incentive will be valid for nine months, starting from March 2021 and is divided into three stages.

A 100 percent reduction is provided for the first three months, a 50 percent reduction is provided for the second three months, and a 25 percent reduction is provided for the third three months and an evaluation will be carried out every three months. (PR of Ministry of Industry/AIT/UN) (RI/MMB)

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