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.

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