The government has passed a ruling that offers tax incentives for manufacturers of eco-friendly cars.
Under the government regulation signed by President Susilo Bambang Yudhoyono on May 23, manufacturers of green vehicles will pay little or no sales tax.
The highest tax break will be offered to producers of affordable eco-cars, referred to as “low cost green cars”, with no obligation to pay sales tax.
As stipulated in the ruling, affordable green vehicles are classified into two categories based on engine capacity: cars with engines of 1,200 cc and up to 1,500 cc. Both types of cars should be able to run at least 20 kilometers on 1 litre of fuel.
Manufacturers of low-carbon emission cars will also benefit. Vehicles in this category utilise a variety of engines: advance diesel/gasoline engine, biofuel engine, hybrid engine and gas engine.
Cars that do 20 to 28 kilometres to the litre will enjoy a 25 per cent discount on sales tax, while those using more 28 kilometres to the litre will be given a 50 per cent tax cut.
Industry Minister MS Hidayat said on Wednesday in Jakarta that following the issuance of the ruling, eco-cars could be now commercially sold.
“The Industry Ministry is preparing a implementing regulation for the ruling,” he told reporters at his office.
The tax cut will benefit major automotive giants Toyota Astra Motor and Astra Daihatsu Motor, which introduced the Toyota Agya and the Daihatsu Agya late last year in their low-cost green car pioneer projects.
