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Indonesia unveils new policy allowing shipbuilders to get free VAT on imported components

JAKARTA ( – The Indonesian government on Tuesday (Sept. 29) announced its new economic policy packages, including tax incentives on shipbuilding industry to lure investment and spur growth of shipbuilding industry in the country.

Finance Minister Bambang Brodjonegoro said the government has issued Government Regulation No. 69, Year 2015 on exemption of value added tax on imported components for transportation industries such as components used by shipbuilding, train as well as aircraft.

The minister said the value added tax on imported components will not be collected or covered by the government.

The tax incentive has long been waited by shipbuilders as it will help shipbuilders to cut cost on shipbuilding components and help make their domestically-made vessels to be competitive than imported vessels.

At present, vessel owners prefer to import prefer to import built-up vessels as they are cheaper than buying vessels from local shipbuilding companies.

“This (incentive) will automatically cut production costs on all types of vessels produced in Indonesia,” Minister Brodjonegoro said.

So far, the purchase of vessel components is slapped with value added tax (VAT) of 10 percent.

The Head of the Indonesia Shipbuilding and Offshore Association (IPPERINDO) Eddy Kurniawan Logam said earlier that the scrapping of the VAT, the price of vessel components would decline.

He is confident that the move would push down vessel prices and encourage domestic vessel industry to grow.

He said around 60 percent of costs in building a new vessel is allocated to buy components and materials, 20-30 percent is to pay workers, therefore shipbuilders could still have profit margin of 10-20 percent. The scrapping of VAT would also make domestically made vessel prices to be competitive with imported vessels. (*)

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