economy

Boost Manufacturing, Government Provides Incentives For Industry Players And Communities

According to the regulations on Value Added Tax (VAT) in Law 7/2021 regarding HPP, the government will implement a VAT rate of 12% starting January 1, 2025, while ensuring fairness.

For strategic Goods and Services, the government will continue to provide VAT exemptions, including for food, transportation, education/health, electricity, water, and financial/insurance services.

In line with this, the government has introduced an Economic Policy Package for Welfare, tailored to the needs of various groups, including low-income households, the middle class, and business actors, such as MSMEs, entrepreneurs, and industries.

In the manufacturing sector, several incentives are prepared to help manufacturers maintain and improve productivity and competitiveness, as well as to support public purchasing power. These incentives target both supply and demand sides.

"The government is paying close attention to the manufacturing sector, including automotive stimulus, which is currently facing sales pressure," said Minister of Industry Agus Gumiwang Kartasasmita in a statement in Jakarta on Friday (December 21).

The VAT incentives borne by the government (DTP) and import duty exemptions for automotive aim to maintain public purchasing power, especially for the middle class, and to support the transition to green energy while developing the electric vehicle ecosystem.

The incentives include:

1) VAT DTP for Battery-Based Electric Vehicles (EV) as follows:

- 10% for Electric Cars and Buses with a minimum local content of 40%

- 5% for Electric Buses with a local content of 20% to less than 40%.

These incentives are part of efforts to reduce emissions and fossil fuel imports, as well as to promote the growth of environmentally friendly transportation industries.

2) The government is waiving 0% import duties and 15% luxury goods tax (PPnBM) for certain electric vehicles (CBU/CKD) imports.

- This incentive is aimed at businesses committed to producing electric vehicles in Indonesia.

- The goal is to speed up the adoption of battery-based electric vehicles (EVs).

- By 2024, two companies have pledged to produce a total of 122,600 units: PT BYD Motor Indonesia plans to make 100,000 BYD vehicles, while PT National Assemblers will produce 4,800 Citroen vehicles, 17,200 Aion vehicles, and 600 Maxus vehicles.

3) The government will cover a 3% PPnBM incentive for hybrid vehicles participating in the Low Carbon Emission Vehicle (LCEV) program.

The Minister of Industry stated that this government effort signals to investors that the incentives and regulations are competitive. The automotive incentives align with the government's goal of making Indonesia a hub for battery-based electric vehicle production.

Additionally, the government is offering an incentive for labor-intensive industries to help them secure financing for machinery upgrades to boost productivity.

“This scheme is for investment loans that also cover working capital needs. With specific credit limits, the government provides a 5% interest subsidy,” the Minister explained.

The government is also providing a 1% VAT incentive for essential manufacturing products, including cooking oil, flour, and industrial sugar.

It is estimated that the demand for "MINYAKITA" cooking oil will reach 175,000 tons per month by 2025, with a maximum retail price of Rp15,700 per liter.

Tag: Boost Manufacturing MINYAKITA Value Added Tax