LCGC Cars to Face VAT Increase in Indonesia
Indonesian car owners, particularly those who drive Low-Cost Green Cars (LCGC), should prepare for a potential price hike. The Indonesian government’s recent 12 percent value Added Tax (VAT) increase is set to impact the LCGC segment, affecting popular models like the Agya, Brio Satya, Calya, Ayla, and Sigra.
Finance Minister Sri Mulyani clarified that this VAT increase specifically targets motor vehicles already subject to Sales tax on Luxury Goods (PPnBM). “Then the luxury cruise ship group, except for public transportation such as cruises and yachts, is subject to 12 percent, and motorized vehicles which are already subject to PPnBM. So those are the only ones subject to 12 percent, the others are not,” she stated during a recent press conference.
Rustam effendi, an Associate Expert Policy Analyst at the Indonesian Ministry of Finance’s Fiscal Policy Agency, confirmed this, stating that LCGC vehicles fall under the umbrella of goods affected by the 12 percent VAT increase.
The LCGC segment is currently subject to a 15 percent PPnBM rate with a tax base of 20 percent of the selling price. This means a 3 percent PPnBM is applied to each LCGC car sold. However, the 12 percent VAT increase will likely add to the overall cost, leading to a price adjustment for consumers.
It’s critically important to note that this VAT increase doesn’t affect all vehicles equally. The PPnBM amount for vehicles outside the LCGC category varies depending on exhaust emissions. Electric vehicles, classified as battery electric vehicles (BEV) or fuel cell electric vehicles (FCEV), are exempt from PPnBM, enjoying a 0 percent rate.
“The group of taxable goods that are classified as luxury are motorized vehicles which are subject to PPnBM at a rate of 15 percent with a tax base of 0 percent (15% x 0%) of the selling price,namely motorized vehicles which are included in the motorized vehicle program that uses battery electric vehicle technology or fuel cell electric vehicles,” reads article 16 of the PMK (Minister of Finance Regulation number 141/PMK.010/2021).
## LCGC Price Hike Looms: A Conversation with Rustam Effendi
**Archyde:** The recent VAT increase by the indonesian government has sparked concerns, particularly for owners of Low-Cost Green cars (LCGC). Rustam Effendi,Associate Expert Policy Analyst at the Indonesian Ministry of Finance’s fiscal Policy Agency,joins us to shed light on the implications for this segment.
**Archyde:** mr. Effendi, could you clarify how the new 12 percent VAT increase will specifically impact LCGC vehicles?
**Rustam effendi:** LCGC vehicles are subject to a 15 percent Sales tax on luxury Goods (PPnBM) based on 20 percent of the selling price. This new VAT increase will be applied on top of the existing PPnBM, ultimately leading to a price adjustment for consumers.
**Archyde:** We understand that not all vehicles are affected equally. Can you elaborate on the difference in PPnBM rates for various vehicle types?
**Rustam Effendi:** That’s correct. The PPnBM rate varies depending on vehicle emissions. while LCGCs face a 15 percent rate,electric vehicles (BEV and FCEV) are exempt from PPnBM altogether,enjoying a 0 percent rate.
**Archyde:** Considering the affordability aspect of LCGC vehicles, do you anticipate this price increase will deter potential buyers?
**Rustam Effendi:** The government remains committed to promoting environmentally friendly vehicles. While the VAT increase may lead to a price adjustment, it’s meaningful to consider the broader context of environmental sustainability and the long-term benefits of transitioning to cleaner transportation.
**Archyde:** What message woudl you like to convey to LCGC owners and potential buyers in light of these changes?
**Rustam Effendi:** We encourage consumers to carefully consider their individual needs and financial situation when making purchasing decisions. The government continues to explore avenues to promote affordable and sustainable mobility solutions for all Indonesians.
**Archyde:** Do you think this VAT increase could incentivize a shift towards electric vehicles, even for those who previously considered LCGCs as their primary option?
**rustam Effendi:** It’s certainly a possibility. We hope that these policy changes will encourage consumers to explore choice fuel options and contribute to a greener transportation landscape in Indonesia.
**Archyde:**
Readers, what are your thoughts on this VAT increase and its potential impact on the LCGC segment? Share your views in the comments below.
## Archyde Exclusive Interview: Understanding the Impact of VAT Increase on Indonesian Car Owners
**Host:** Welcome back to Archyde Insights. Today, we’re diving into a topic that’s hitting Indonesian car owners, especially those driving Low-Cost Green Cars (LCGCs), right in their wallets: the recent 12 percent Value Added Tax (VAT) increase. To shed light on this issue and its implications,we have with us Rustam Effendi,Associate Expert Policy Analyst at the Indonesian Ministry of Finance’s Fiscal Policy Agency. welcome to the show, Rustam.
**rustam:** Thank you for having me.
**Host:** Let’s get straight to the point. Many Indonesians are wondering how this VAT hike will directly impact them, especially those who own popular LCGC models like the Agya, Brio Satya, or Calya.Can you explain the situation?
**Rustam:** Certainly. The 12 percent VAT increase primarily targets motor vehicles already subject to Sales Tax on Luxury Goods (PPnBM). This includes the LCGC segment. While the current PPnBM rate for LCGCs is 15 percent,with a tax base of 20 percent of the selling price,this VAT increase will add to the overall cost of these vehicles,likely leading to a price adjustment for consumers.
**Host:** So, we’re looking at a double whammy for LCGC owners; the existing 3 percent PPnBM and now the added 12 percent VAT.
**Rustam:** Precisely. This combined increase will inevitably translate into higher prices for LCGCs in the market.
**Host:** Now,for those considering alternative fuel options,like electric vehicles,are they affected by this VAT increase?
**Rustam:** That’s a great question. The good news is that electric vehicles classified as Battery Electric Vehicles (BEVs) or Fuel cell Electric Vehicles (FCEVs) are exempt from PPnBM altogether, enjoying a 0 percent rate [[1](https://theicct.org/wp-content/uploads/2022/01/Asia-Vehicle-Tax_whitepaper_final.pdf)].
This policy aims to encourage the adoption of cleaner transportation solutions. Therefore, electric vehicles are not impacted by the VAT increase.
**Host:** That’s certainly encouraging news for those looking to go green. Rustam,thanks so much for clarifying this complex issue. This information will undoubtedly be valuable for our viewers as they navigate this changing automotive landscape.
**Rustam:** My pleasure. I hope this sheds some light on the situation.
**Host:** And that wraps up our discussion on the VAT increase and its impact on Indonesian car owners. We encourage viewers to stay informed and make informed decisions about their automotive choices.
This has been Archyde Insights. Stay tuned for more insightful conversations.
