12% VAT Takes Effect, Electric and Hybrid Cars Receive Incentives

KatadataOTO – The increase of VAT to 12 percent from 11 percent is confirmed to take effect today, Wednesday (1/1). This was previously stated by President Prabowo Subianto after a year-end meeting at the Ministry of Finance Office.

The President emphasized that the tax increase is specifically for luxury goods and services in accordance with the mandate of Law Number 7 of 2021 concerning the Harmonization of Tax Regulations.

“The agreement between the Indonesian government and the DPR in 2021 was that the rate increase would be carried out in stages. From 10 percent, to 11 percent in April 2022 which has been implemented, then the law mandates an increase from 11 percent to 12 percent on January 1, 2025,” said President Prabowo Subianto in Jakarta, Tuesday (30/12).

Along with this, a stimulus package has been prepared for a number of sectors, including incentives for electric and hybrid cars.

Photo : Toyota

The gradual increase to 12 percent VAT is intended to avoid a significant impact on public purchasing power, inflation, and economic growth.

Furthermore, the Ministry of Finance explained that the incentives provided by the government amount to Rp 265.6 trillion, distributed to the public through a stimulus package.

This includes Government-Borne VAT for electric cars, Government-Borne Luxury Goods Sales Tax (PPnBM DTP) on certain CBU (Completely Built Up) four-wheeled EVs, the delivery of certain CKD (Completely Knocked Down/locally assembled) four-wheeled EVs, import duty exemption for CBU EVs, and PPnBM DTP for hybrid motor vehicles.

Following the implementation of the 12 percent VAT, its impact will begin to be felt in the near future. As stated by several manufacturers some time ago, the OTR (On The Road) price of cars is almost certain to increase.

Specifically, electric and hybrid cars that have met the requirements will not be affected. It should be noted that the 10 percent CKD electric car incentive policy, which was in effect in 2024, will be continued this year.

Photo : Hyundai

To boost sales of environmentally friendly vehicles, a three percent Government-Borne Luxury Goods Sales Tax (PPnBM DTP) for hybrid cars will also apply in 2025.

This is a breath of fresh air for a number of manufacturers that are aggressively marketing hybrid cars, such as Toyota. The Japanese manufacturer has even confirmed that its hybrid line registered to receive incentives will certainly see a price drop.

“They must go down (the prices of Toyota hybrid cars). Just like our commitment with the previous PPnBM, whenever there is a subsidy from the government, we are transparent and it is directly translated into the price,” affirmed Anton Jimmi Suwandy, Marketing Director of PT TAM in South Jakarta some time ago.