Ministry suggests restoring tax relief for car buyers in COVID era – Regulations

The Ministry of Industry has suggested that the new government led by President-elect Prabowo Subianto reinstate a policy that exempts consumers from the luxury goods tax (PPnBM) on car purchases, last introduced during the COVID-19 pandemic to boost sales in a sluggish automotive market.

Through this policy, the government previously covered the luxury tax on car purchases on behalf of buyers.

Industry Ministry spokesman Febri Hendri Antoni Arief told reporters on Tuesday that the government stands to gain “two rupees” in revenue for every rupee lost in luxury goods tax due to the exemption.

He said the government “must treat incentives for industry not as a cost but as an investment.”

Also read: Car financing drops 15% in July as new car sales fall

The proposal to reinstate the incentive comes amid a slump in car sales. In the first half of 2024, wholesale, or factory-to-dealer, sales fell 19.5 percent year-on-year (y/y) to 408,012 units from 506,427 units in the same period last year, according to data released by the Indonesian Automotive Manufacturers Association (Gaikindo).

Falling car sales this year have prompted automakers to reassess the industry’s goal of selling 1.1 million cars this year, a 10 percent increase from the 1 million cars sold last year.

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