automotive

The 12% PPN Is Expected To Dampen The Momentum Of The Automotive Industry

The Chairman of the Indonesian Automotive Industry Association (Gaikindo) has expressed concerns that the implementation of a 12% Value Added Tax (VAT) on the automotive sector could dampen the industry's momentum.

"I am uncertain whether the automotive sector is included, as there has been no clarification. However, if asked whether there will be an impact, the answer is yes. Will the impact be significant? Certainly. The automotive industry is highly sensitive to pricing," stated Gaikindo Chairman Yohanes Nangoi during a phone interview on Friday, December 6.

Should the automotive sector be included in the proposed differentiated VAT rate scheme by the House of Representatives, he noted that a relatively substantial price increase would be unavoidable. This is due to the presence of three tax instruments applicable to vehicles: the Motor Vehicle Transfer Fee (BBNKB), the Motor Vehicle Tax (PKB), and the VAT itself.

For instance, if a vehicle priced at IDR 200 million falls under the differentiated VAT rate scheme, the BBNKB, which is contingent on regional decisions, could potentially reach the upper limit of 20%. This would result in an approximate 8% increase from the applicable VAT rate if the differentiated VAT scheme is enacted.

Consequently, Yohanes indicated that the price of a vehicle currently valued at IDR 200 million could rise to around IDR 216 million, not accounting for additional increases in VAT and PKB rates. "Thus, the increase could be nearly IDR 20 million. If a vehicle priced at IDR 200 million sees a rise of IDR 20 million, it will undoubtedly have a significant impact, potentially equating to two monthly installments. This is what we are concerned about," he elaborated.

"It is also important to note that the vehicles affected are primarily those produced in Indonesia. This is what worries me; the impact is already quite severe," Yohanes continued. Nevertheless, he is awaiting the government's decision regarding the VAT rate. He is confident that the government will carefully and comprehensively consider the future VAT policy.

Tag: Automotive Industry Gaikindo Value Added Tax