PPN and PpnBM will be exempted

"The complexity of the ecosystem for electric-based motor vehicles is vast. So, this complexity must be seen as a potential that we must hold for the domestic industry," said Agus Gumiwang Kartasasmita, Minister of Industry (Menperin).

Agus said the government was formulating incentives such as 0% VAT for electric vehicles which would make the national fiscal incentives more competitive to attract a share of electric vehicle investors to Indonesia.

"The president has agreed. So, all of our fiscal policies must be more competitive compared to the fiscal policies that have been given by our competitor countries in the context of electric cars," said Agus, on July 31, 2023.

Agus said that in addition to VAT, the president agreed to abolish the Luxury Goods Sales Tax (PpnBM) on imports of completely built up (CBU) cars. Currently, CBU is subject to 125% PPnBM tax, 50% import duty and 10% income tax.

In addition, the government will revise Presidential Regulation No. 55 of 2019 concerning the Acceleration of the Battery-Based Electric Motorized Vehicle Program. The government will change the deadline for setting the 40% Domestic Component Level (TKDN) in 2024 to 2026, while 60% and 80% will remain unchanged in 2029 and 2030 respectively.

Meanwhile, Bahlil Lahadalia, Minister of Investment said, this incentive would attract several other electric car manufacturers to the country, such as Wuling and BYD. Currently, the only electric car manufacturer operating in Indonesia is Hyundai.

Meanwhile, he sees tax incentives and easing TKDN requirements as an effort by the government to compete with Thailand and Malaysia.

"If we don't discuss this, we will surely be left behind by our neighboring countries," he said.

Relaxation of requirements for electric motorcycle subsidies

The President will revise the subsidy requirements for the purchase of electric-based vehicles, both in the form of cars and motorbikes by removing the requirements for subsidizing electric motorbikes.

Agus said that all the requirements for the assistance program for purchasing electric motorbikes would be eliminated. Even so, Agus requires that one National Identity Number (NIK) can only receive assistance once.

The Ministry of Home Affairs (Kemendagri) records that the total population of productive age in the country reaches 190.83 million people. Meanwhile, the assistance provided in the program is IDR 7 million per unit. This requires a budget of IDR 1.335 trillion. However, Agus has not explained in more detail the scheme of the aid program in more detail.

Agus plans to further evaluate the refund or reimbursement of taxes to electric car buyers with Sri Mulyani, Minister of Finance (Menkeu).

Moeldoko, the Presidential Chief of Staff, said that the consideration for revising the subsidy was due to the fact that incentives for unit buyers were still small.

Until now, this incentive has only been distributed to 36 units purchased from the target of 200,000 electric motorcycles.

"Therefore there are changes, maybe the requirements will be eliminated," he said, on July 31, 2023.

So far, the conditions apply only to small and medium micro entrepreneurs, customers of the State Power Plant (PLN) with a voltage of 900 kilowatts per hour (KWh), and recipients of social assistance.

"These conditions affect the realization of assistance in purchasing electric motorbikes," he said.

So far, there have been 1,056 registered in the process of registering the purchase of an electric motorbike. Meanwhile, 175 purchases are still in the verification process.