Jakarta – The Value Added Tax (VAT) will increase to 12 percent starting in 2025. With this policy, car prices are guaranteed to rise.
Coordinating Minister for Economic Affairs Airlangga Hartarto revealed that the government will announce the VAT increase to 12 percent next week. The VAT increase to 12% will take effect starting January 1, 2025. This is in accordance with Law No. 7 of 2021 on the Harmonization of Tax Regulations (HPP Law).
“We will also report this to him (Prabowo Subianto). This is the report,” said Airlangga, quoted by detikFinance.
The VAT increase will have a significant impact on car prices. Car prices are expected to rise due to this policy. The Marketing Director of PT Astra Daihatsu Motor, Sri Agung Handayani, revealed that the price increase could reach 5 percent of the current on-the-road car prices.
“This is our mathematical calculation for all models,” said Sri Agung recently.
Sri Agung explained that the calculation was based on a mathematical simulation for all vehicle models. According to her, the VAT increase to 12 percent will directly affect people’s purchasing power.
On another occasion, a Toyota salesperson revealed that there will be a significant price increase due to the 12 percent VAT implementation. For example, in the Low-Cost Green Car (LCGC) segment, such as the Calya-Agya, the price increase could reach IDR 17 million. With these calculations, the price of the Calya-Agya could surpass IDR 200 million.
“Next year, VAT will increase, and the estimated price increase for cars like the Calya-Agya will be around IDR 17 million. So, the price (of LCGC cars) will exceed IDR 200 million,” he said.
Not only will the automotive industry in Indonesia face pressure from the 12 percent VAT increase, but it will also face additional pressure from changes to the Motor Vehicle Tax (PKB) and Motor Vehicle Transfer Fee (BBNKB). The government is changing the rules for the Motor Vehicle Tax (PKB) and the Vehicle Transfer Fee (BBNKB).
These changes are stated in Law No. 1 of 2022 on the Financial Relations between the Central Government and Regional Governments (HKPD Law). With the issuance of this regulation, regional governments now have the authority to add additional levies on PKB and BBNKB. This regulation was enacted on January 5, 2022, and will be applied three years later, meaning it will take effect on January 5, 2025, next year.
