Agus Gumiwang's Answer To The New Car Tax Relief In The Midst Of The VAT On Basic Foods: Awaken Economic Passion

Minister of Industry, Agus Gumiwang Kartasasmita. (Photo: Doc. Ministry of Industry)

JAKARTA - The government has extended the fiscal incentive for Sales Tax on Luxury Goods or PPnBM 0 percent for new cars. From what originally ended in May, it has now been continued until August 2021.

This decision was approved by the Minister of Finance Sri Mulyani Indrawati at the National Economic Recovery (PEN) meeting chaired by the Coordinating Minister for Economic Affairs Airlangga Hartarto last Friday, June 11, 2021.

Minister of Industry Agus Gumiwang Kartasasmita said the government continues to accelerate the recovery of the national economy from the impact of the pandemic by implementing various strategic policies. One of them is by extending the government-borne PPnBM fiscal incentive (DTP) until August 2021.

Furthermore, Agus reasoned that the extension of the relaxation of the new car tax was a breakthrough in order to create a conducive business climate in the midst of the COVID-19 pandemic

"This aims to revive 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 Jakarta, quoted Monday, June 14.

Thus the 100 percent PPnBM discount incentive or Zero Percent PPnBM applies from March to August 2021. The PPnBM discount policy applies to new 4x2 passenger cars with a 1,500cc engine capacity with a minimum local content of 70 percent.

Potential of the automotive sector

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 a 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, Agus said, the government has implemented the PPnBM DTP policy on the purchase of new cars. This program starts for 1,500cc passenger cars with certain local content.

According to the scheme, changes to the tax rebate apply every three months, namely March to May 100 percent discount, July to August 50 percent, and October to December 25 percent.

Agus said, 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," he said.

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 this positive response and effect, the government will extend the 100 percent PPnBM facility for sales of 4x2 cars under 1500cc until August 2021.

Furthermore, Agus said, the period for the 50 percent PPnBM discount was extended to December 2021.