Jakarta. President Joko Widodo has agreed to extend luxury tax exemption on low-cost cars until the end of this quarter, a senior minister said over the weekend.

Band new cars priced at Rp 200 million or less are exempt from the 3 percent luxury tax for the next three months, chief economic minister Airlangga Hartarto said.

The luxury tax will be reimposed at 1 percent in the second quarter and 2 percent in the third, he added.

“The normal 3 percent luxury tax applies from the fourth quarter onward,” Airlangga said.

The 15 percent luxury tax on cars within the price range of Rp 200 million to Rp 250 million is reduced by half in the first quarter of the year.

“From the second quarter, buyers must pay the normal luxury tax of 15 percent,” the minister said.

The government has introduced vehicle luxury tax exemption since early last year to keep the domestic automotive industry afloat amid the devastating economic impact of the Covid-19 pandemic.

The national car sale volume surged by 66.7 percent to 887,202 units last year thanks to the massive tax incentive, though it remains below the pre-pandemic level of over 1 million units.

"Government’s stimulus in the form of luxury tax exemption has been very helpful in boosting sales and production volume," Jongkie Sugiarto, the chairman of the Indonesian Automotive Manufacturers Association (Gaikindo), said last week.

Japanese car manufacturers remain a dominant force in the Indonesian auto market, with Toyota leading by selling 296,740 units, followed by Daihatsu (164,908), Mitsubishi (144,123), Honda (91,793), and Suzuki (91,122).