Sunday, March 28, 2021

PPnBM News for Cars

The PPnBm tax is in the public spotlight after the government discounted taxes on the purchase of new cars. PPnBM stands for Sales Tax on Luxury Goods. Luxury goods tax PPnBM, namely additional levies after or in addition to Value Added Tax or VAT (PPN and PPnBM). That is why, in the sense of PPnBM, this tax is not a creditable tax as it applies to VAT taxes.

Referring to Article 8 of Law Number 42 of 2009, the lowest PPnBM rate is set at 10 percent and the highest is 200 percent. If the VAT tax is levied on each line of transactions, aka levied on each added value of goods or trade (each transaction), then PPnBM tax means tax that is only collected once.

PPnBM rates are imposed, namely at the time of import of taxable goods (BKP) which is considered luxury or at the time of delivery of luxury BKP which is carried out by entrepreneurs who are domestic producers or manufacturers of the luxury BKP.

Another difference, VAT is an indirect tax because it is immediately deducted at the time of the transaction and borne by the consumer or buyer. Meanwhile, PPnBM is a tax paid by producers or sellers, aka direct taxes, because the tax will be borne by consumers in the selling price.

The Financial Services Authority (OJK) noted that currently consumer credit has begun to experience a significant increase following the impact of the Covid-19 pandemic. One indicator is that there is a surge in new car orders. This conclusion is conveyed in line with the improvement in people's purchasing power and the implementation of sales tax incentives on luxury goods (PPnBM) for new cars starting March 1, 2021.

The government officially expanded the relaxation of Sales Tax on Government Borne Luxury Goods (PPnBM-DTP) for motor vehicles with engine cylinder capacities between 1,501 cc to 2,500 cc.

There are two PPnBM reduction schemes given to cars with 4x2 and 4x4 drives. The first scheme for 4x2 vehicles is a 50 percent PPnBM discount. The PPnBm rate which was originally 20 percent will be 10 percent for phase I (April-August 2021). As for stage II (September-December 2021), the PPnBm for this type of car becomes 15 percent.

Car sales in 2020 were recorded at only 532 thousand units, a drop from 2019 which could reach more than 1 million units. Before the PPnBM relaxation was implemented, the Association of Indonesian Automotive Industries (Gaikindo) estimated that car sales in 2021 would be 750 thousand units. However, the Coordinating Ministry for the Economy said the figure could reach 1 million units due to the help of PPnBM relaxation.

Meanwhile, the scheme for vehicles with 4x4 drives is a 25 percent discount. The car segment, which originally had a 40 percent PPnBM rate, will be 30 percent for phase I and 35 percent for phase II.

In the first week of March, this program resulted in an increase in the number of bookings of about 140 percent for the types of vehicles that are set to receive PPnBM DTP for the 2021 fiscal year.

General Secretary of the Association of Indonesian Automotive Industries (Gaikindo) Kukuh Kumara is grateful for the expansion of PPnBM relaxation which hopes to improve the automotive industry ecosystem, especially since this policy is aimed at locally produced cars that use a lot of domestic components.

The Ministry of Industry is optimistic that the policy to expand the PPnBM relaxation will run well and be more targeted, thus benefiting the community as consumers, industry, and also the government.


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