Good News From Minister Agus Gumiwang: Government Extends 100 Percent Discount On Vehicle Taxes

JAKARTA - The government continues to accelerate the recovery of the national economy by implementing various strategic policies, one of which is through the provision of fiscal incentives in the form of reducing the Sales Tax on Government-Born Luxury Goods (PPnBM DTP) rates for motorized vehicles.

“The Ministry of Finance agrees with us that PPnBM DTP can be extended. This is in accordance with the direction of President Joko Widodo, a breakthrough is needed to continue to create a conducive business climate in the midst of a pandemic. This is aimed at reviving business enthusiasm in the country, especially the industrial sector, which has consistently contributed significantly to the national economy", said Industry Minister Agus Gumiwang Kartasasmita in a statement in Jakarta, reported by Antara, Sunday, June 13.

The extension of the PPnBM DTP incentive was proposed by the Minister of Industry and approved by the Minister of Finance Sri Mulyani Indarwati at the National Economic Recovery (PEN) meeting chaired by the Coordinating Minister for Economic Affairs Airlangga Hartarto, Friday, 11 June.

The Ministry of Industry noted that currently the potential of the automotive sector is supported by 21 companies, with a total capacity of 2.35 million units per year and direct employment of 38 thousand people. In addition, more than 1.5 million people work along the industry value chain.

"This means that the automotive industry is one of the drivers of the economy whose growth must be accelerated because this industry involves many local business actors in its production chain from upstream to downstream", he explained.

Since March 1, 2021, the government has implemented the PPnBM DTP policy on the purchase of new cars. This program starts with 1.500cc passenger cars with certain local content. According to the scheme, changes to tax cuts are applied every three months, namely March-May 100 percent discount, July-August 50 percent, and October-December 25 percent.

Along with the development of the implementation of the policy, the performance of the automotive industry and car sales in the country showed a positive trend.

"The government will indeed conduct an evaluation every three months to see the impact of the PPnBM DTP discount for the purchase of a new car", said Agus.

In March when the PPnBM discount was first applied, there was an increase in new car sales of up to 28.85 percent. In fact, in April 2021, the sales surge reached 227 percent compared to the same period in 2020 (year on year/yoy).

Referring to data from the Association of Indonesian Automotive Industries (Gaikindo), retail sales, cumulatively, from January to April 2021 rose 5.9 percent yoy to 257.953 units. On a monthly basis, retail sales volume has approached the normal level or around 80.000 per month.

Seeing the positive response and effect, the government will extend the 100 percent PPnBM DTP facility for sales of 4x2 cars under 1.500 cc until August 2021. Furthermore, the period for the 50 percent PPNBM DTP discount is extended to December 2021.

The proposal for the extension of the PPNBM DTP discount was previously submitted by the Indonesian Automotive Industry Association (Gaikindo).

“The government can assess and evaluate what happened in the last three months, namely March, April, and May. If we see it, it is right on target, and all parties are happy with this stimulus", said Chairman I of Gaikindo, Jongkie Sugiarto.

He assessed that the 100 percent discount program for PPnBM DTP was a success, with all parties benefiting, both in terms of automotive businesses, consumers, and the government.

Not only the automotive industry players who benefit from the significant increase in car sales, according to him, the government has also succeeded in obtaining VAT and PPh income from the increase in car sales. On the other hand, consumers get a new vehicle at a more affordable price.