automotive

Concerns Of The Automotive Industry Beyond The 12 Percent VAT

The automotive industry is likely to be affected by the increase in the value-added tax (VAT) to 12 percent. This is due to the fact that the 12 percent VAT applies to goods and services classified as luxury items, with nearly all vehicles falling into the category subject to the Luxury Goods Sales Tax (LGST). 

Finance Minister Sri Mulyani has announced the list of items that will be impacted by the 12 percent VAT starting January 1, 2025. Motor vehicles that are already subject to the Luxury Goods Sales Tax (LGST) are included in this category. 

"Additionally, luxury cruise ships, except for public transport such as cruises and yachts, will incur the 12 percent tax, along with motor vehicles already subject to LGST. Therefore, these are the only items affected by the 12 percent rate; others are not," stated Sri Mulyani during her presentation at the Ministry of Finance in Jakarta. The LGST for motor vehicles is regulated under Finance Minister Regulation No. 141/PMK.010/2021 concerning the Determination of Types of Motor Vehicles Subject to Luxury Goods Sales Tax and the Procedures for Imposing, Granting, and Managing Exemptions and Refunds of Luxury Goods Sales Tax. According to this regulation, nearly all vehicles are subject to LGST. 

However, Kukuh Kumara, the Secretary General of the Indonesian Automotive Industry Association (Gaikindo), indicated that the most significant challenge for the automotive industry is not the increase in VAT to 12 percent, but rather the additional motor vehicle tax options and the new vehicle name transfer tax options that took effect today, Sunday (January 5, 2025). 

"We have also engaged in discussions and shared our thoughts regarding the increase in options. The rise in these options is quite substantial. Several regions have already experienced that increasing the vehicle transfer tax and motor vehicle tax has led to a decline in vehicle sales," Kukuh remarked during the Evening Up program on CNBC Indonesia. 

Moreover, Kukuh noted that in most provinces, the local revenue from motor vehicles is quite significant, ranging from 40 to 80 percent. 

Tag: Automotive Industry Sri Mulyani Value-added Tax VAT