Indonesia considers slashing VAT on electric car sales to 1%

INDONESIA is considering reducing the value-added tax (VAT) on electric car sales from 11 per cent to 1 per cent to drive up demand and attract investment, said Sepian Hario Seto, a senior official with the investment coordinating ministry.

Indonesia has a target of having at least 1.2 million electric motorcycles and 35,000 electric cars in use by 2024.

“We are still doing a benchmark analysis with other countries [on electric vehicles incentives],” he told reporters after speaking at an investment forum on Wednesday.

He also said the government would give a cash incentive of 7 million rupiah (S$613.6) for every electric motorcycle sold, until sales reach a certain volume that is still under discussion.

The planned incentives, however, may only be available for electric vehicles (EVs) that are at least 40 per cent locally-made, under Indonesia’s ‘local content rule’.

“The [next step] is that the local content percentage be increased further to 60 per cent and more,” he added.

Separately on Wednesday, senior cabinet minister Luhut Pandjaitan said the regulation laying out incentives for EVs is expected to be issued next week. REUTERS