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Indonesian govt lifts import duty for auto industry

Publication Date : 13-06-2012


The Indonesian government has issued a new rule to exempt import duties for machinery and goods used in automobile production facilities in a bid to promote the implementation of low-cost green cars.

The Finance Minister Regulation revised a previous regulation by including the automotive industry, particularly the assembling sector, as the receivers of the incentives, Industry Ministry director general for high-technology priority industries Budi Darmadi said yesterday.

“We expect that the incentive will help boost investment for the low-cost and green car projects,” he told The Jakarta Post. Previously, the duty free incentives were given only to other industries.

Several automakers have been said to have joined the project and made new investments, including Astra Daihatsu Motor and Toyota Astra Motor.

Budi further said that the duty-free facility would apply to a wide range of machines used in a series of assembling activities, including pressing, stamping and welding, which at present were subjected to import duties from 7.5 per cent to 15 per cent.

“However, the automobile producers can receive the facility as long as 30 per cent of the equipment used in their plants are locally made,” he said, adding that the incentive would apply within four years after the firms proposed the request and would be implemented for both new investments and extended investments.

The import duty-free facility is one of the incentives prepared by the government to support the development of inexpensive and environmentally friendly cars. The other incentive will be, among others, a reduction of import duty for components used by other firms in automobile production activities other than assembling and a reduction in the luxury-goods sales tax, which is set to be issued later this year.

Under the prepared incentive of a sales tax cut, the amount of the tax cut would be based on the amount of locally sourced materials used to make low-cost and green vehicles, the degree of eco-friendly technology employed in the manufacturing process and the efficiency of fuel consumption.

Automobile makers will be able to obtain the lower tax rate when they make cars with 1,000 cubic centimetre (cc) engines that can travel farther than 22 kilometres on a liter of fuel or cars with 1,200-cc engines that could travel more than 20 kilometres per liter. The tax break will also be provided for manufacturers willing to transfer their technology within five years of starting local production.

Automobile manufacturers have long called for the government to lower its current 10 per cent luxury goods sales tax on cars with engines under 1,500 cc.

At present, the government imposes various taxes for automobiles, including a motor vehicle tax for cars, a vehicle ownership transfer tax ranging from 20 to 25 per cent of a car’s sales value and a value-added tax, which can be as much as 40 per cent of a car’s sales value, which make it difficult to push down car prices to below 100 million rupiah (US$10,600)—the benchmark for a car to be considered low cost.


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