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Auto industry expects minimal impact on car sales from VAT hike

Carmakers maintain they can still aim to sell 1 million units of new vehicles next year, despite a revised 2024 target to 850,000 vehicles from 1 million.

Ruth Dea Juwita (The Jakarta Post)
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Jakarta
Sun, December 29, 2024

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Auto industry expects minimal impact on car sales from VAT hike Awaiting consumers: Multipurpose vehicles are parked at Tanjung Priok Port's car terminal in Jakarta on Dec. 15, 2023. (Antara/ (Antara/Andika Wahyu)

I

ndonesian carmakers are expecting a minimal impact from the planned value-added tax (VAT) increase to 12 percent which is set to take effect in January 2025, thanks to fiscal incentives designed to offset the burden.

The Indonesian Automotive Manufacturers Association (Gaikindo) said the incentives would help alleviate concerns from businesses and industry players about the potential impact of the tax hike on vehicle sales, especially given the current sluggish market conditions.

“The VAT increase to 12 percent next year will not significantly hurt sales potential. The impact may even be negligible,” said Gaikindo chairman Yohanes Nangoi on Thursday, as quoted by state news agency Antara.

Read also: Car sales may still lag in 2025 despite tax incentive on hybrid vehicles

The government has been adamant in moving forward with the planned VAT hike in January next year despite protests from businesses and consumers alike.

On Dec. 16, it announced multiple incentives to cushion the impact of the VAT hike from 11 to 12 percent.

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That includes partially waiving the VAT for completely knocked down (CKD) electric vehicle purchases and luxury sales tax (PPnBM) for completely built-up (CBU) electric vehicle imports. 

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