Indonesia to remove ‘luxury tax’ on cars to assist auto sector hit hard by Covid – 10% to 30% off for 3 months

Indonesia to remove ‘luxury tax’ on cars to assist auto sector hit hard by Covid – 10% to 30% off for 3 months

The coronavirus pandemic and movement restrictions to curb its spread has dampened appetite for new cars, but as Malaysia showed with its sales tax exemption, consumers can be lured to showrooms if there are tax breaks to be had. Indonesia has now announced the temporary removal of a ‘luxury tax’ on some cars to boost sales and assist its auto industry.

The republic’s economic ministry said that from March to May, the government will remove the luxury tax for sales of sedans and two-wheel drive cars with engine capacity below 1,500 cc. Currently, the luxury tax rates for those cars are between 10% to 30%, Reuters reported.

For the next three months till August, the authorities will give a 50% discount for luxury tax payments, and the following three months will see the discount halved again, in a move to get punters to move fast. The ministry said that the temporary scheme would be evaluated every three months.

The ministry said that the auto industry is important for Indonesia’s economy, as carmakers, dealers and workshops combine to provide employment for 1.5 million people. This tax incentive could boost production by 81,752 units, it added.

Auto sales in ASEAN’s most populous country and largest economy has recovered after a sharp drop at the start of the pandemic, but have yet to return to pre-Covid levels. Indonesia’s auto sales in 2020 was just over 532,000 units, around half of the 2019 total. Carmakers association Gaikindo has been pushing the government for months for tax breaks to entice buyers, so this is a win for the industry.

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Danny Tan

Danny Tan loves driving as much as he loves a certain herbal meat soup, and sweet engine music as much as drum beats. He has been in the auto industry since 2006, previously filling the pages of two motoring magazines before joining this website. Enjoys detailing the experience more than the technical details.



  • Congratulations to Indonesian,

    Enjoy the ride

    Like or Dislike: Thumb up 2 Thumb down 0
  • Trump Ajibkor on Feb 16, 2021 at 12:52 pm

    Greatly lower car taxes,is what the gomen can implement if it is really interested to help rakyat who are genuinely in need of new vehicles.
    No point giving a lot of ‘political rhetoric” in lengthy press conference.
    Hello,this is abad 21.Everyone from a kindy kid to grandpa has a smartphone.We can differentiate sugar coated speeches from real empathy.
    Lower car taxes will translate into lower downpayments,lower accumulated hp interest and monthly payments.
    Lets see whether our relevant menteris walk the talk or keep practising double standards while promising Elon Musk can give you a free ride to Mars.

    Like or Dislike: Thumb up 1 Thumb down 2
    • Our relevant mentris had been giving SST free tax period for car buyers since July 2020. Our neighbours are too slow to follow.

      Like or Dislike: Thumb up 5 Thumb down 1
  • Fake News on Feb 16, 2021 at 12:59 pm

    I thought many have said other countries go no taxes on cars and their prices are lower than ours? Seems like all these have been fake news. So why is Indonesia copying our methods to boost their economy?

    Like or Dislike: Thumb up 9 Thumb down 1
  • Sam Loei on Feb 16, 2021 at 1:37 pm

    in Malaysia ppl buying news cars are normally in the top half of M40 and T20. that accounts to about 12 mil of total population and is a false economy indicator to all because the ones that really affected are those in the B40 and lower half of the M40.

    perhaps when indon car sales was downed by half, that is the real truth of the after effect of the pandemic.

    msia govt giving tax free break actually does not benefitted the B40 but only those in automotive line (business owner, management executives and lower ranking staff) and of course car buyers.

    Like or Dislike: Thumb up 0 Thumb down 0
  • Dong gor on Feb 16, 2021 at 2:11 pm

    What happens at the 4th month, the 5th…nth? Live on the 3 months profit? Keke

    Like or Dislike: Thumb up 2 Thumb down 1

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