In a move to reshape fiscal policies, Indonesian government has issued several regulations concerning the imposition of new tax and excise rates, set to take effect in 2024. These regulations encompass both nationwide and provincial-level tax adjustments.
Among the new tax regulations implemented by the central government across Indonesia are excise duties on tobacco products, alcoholic beverages, packaged sweetened drinks, plastic, and electric cigarettes. Additionally, specific provinces will witness changes in tax rates related to entertainment industries, motor vehicles, motor vehicle fuel, heavy equipment, advertising, land, buildings, and groundwater.
Many of these revised rates represent a significant increase, potentially impacting the purchasing power and consumption patterns of the public.
Here is a breakdown of the new tax and excise rules taking effect in 2024:
Excise Duty on Tobacco Products (CHT)
The government has increased the average excise duty on tobacco products by 10% starting January 1, 2024, as outlined in Minister of Finance Regulation No. 191/PMK.010/2022. This applies to cigarettes, cigars, rolled-leaf cigarettes, and cut tobacco.
Detailed adjustments include increases in rates for machine-rolled clove cigarettes (SKM) and machine-rolled white cigarettes (SPM) across various groups. Hand-rolled clove cigarettes (SKT) or hand-rolled white cigarettes (SPT) in different groups also see adjustments, while hand-rolled filter cigarettes (SKTF) without a specific group witness a significant increase.
Notably, the rates for shredded tobacco (TIS), leaf cigarettes or Klobot (KLB), and Cigars (CRT) remain unchanged.
- Cigarette Machine-Rolled Kretek (SKM) Group I increased by 11.8% to Rp2,260 per stick.
- Machine-Rolled Kretek (SKM) Group II increased by 11.5% to Rp1,380 per stick.
- Cigarette Machine-Rolled White (SPM) Group I increased by 11.9% to Rp2,380 per stick.
- Machine-Rolled White (SPM) Group II increased by 11.8% to Rp1,295 per stick.
- Hand-Rolled Kretek (SKT) or Hand-Rolled White (SPT) Group I increased by 4.7% to Rp1,375 – Rp1,980 per stick.
- Hand-Rolled Kretek (SKT) or Hand-Rolled White (SPT) Group II increased by 4.2% to Rp865 per stick.
- Hand-Rolled Kretek (SKT) or Hand-Rolled White (SPT) Group III increased by 3.3% to Rp725 per stick.
- Hand-Rolled Kretek Filter (SKTF) or Hand-Rolled White Filter (SPTF) without a group increased by 11.8% to Rp2,260.
- Clove Cigarette with Benzoin (KLM) Group I increased by 4.7% to Rp950 per stick, and KLM Group II had no increase. There was no increase for Sliced Tobacco (TIS), Hand-Rolled Leaf Cigarettes or Klobot (KLB), and Cigars (CRT).
Excise Duty on Alcoholic Beverages
The government officially raises the excise duty rates on alcoholic beverages effective from December 28, 2023, according to Minister of Finance Regulation No. 160 of 2023. The rates vary depending on the alcohol content and the type of beverage.
- Alcoholic beverages with any alcohol content, whether domestically produced or imported, are subject to a duty of Rp20,000 per litre.
- Beverages Containing Ethyl Alcohol Group A with an alcohol content of up to 5%, both domestic and imported, incur a duty of Rp16,500 per litre.
- Group B, with alcohol content between 5%-20%, produced domestically, is subject to a duty of Rp42,500 per litre.
- Group B, with alcohol content between 5%-20%, produced through imports, incurs a duty of Rp53,000 per litre.
- Group C, with alcohol content between 20%-55%, produced domestically, faces a duty of Rp101,000 per litre.
- Group C, with alcohol content between 20%-55%, produced through imports, is taxed at Rp152,000 per litre.
Additionally, liquid-form concentrates containing ethyl alcohol, both domestically produced and imported, have a duty of Rp288,000 per litre. Solid-form concentrates containing ethyl alcohol are subject to a duty of Rp1,000 per gram, both domestically produced and imported.
Excise Duty on Packaged Sweetened Drinks
The new tax regulation imposed excise duties on packaged sweetened drinks (MBDK) in 2024, following a delay in its implementation last year. This levy is outlined in Presidential Regulation No. 76 of 2023 on the Detailed State Budget for the Fiscal Year 2024, with an anticipated contribution of Rp4.38 trillion to excise revenue.
Excise Duty on Plastic
According to Presidential Regulation No. 76 of 2023, the government will impose excise duties on plastic components, targeting revenue of Rp1.85 trillion.
Tax on Electronic Cigarettes
Indonesian government introduced a 10% increase in the tax rate for electronic cigarettes, effective January 1, 2024, aligned with conventional cigarette excise taxes. This is following Minister of Finance Regulation No. 143/2023 on the Procedure for Collection, Deduction, and Deposit of Electronic Cigarette Taxes.
The regulation stipulates that at least 50% of the revenue from electronic cigarette taxes is earmarked for public health services (Jamkesnas) and law enforcement, ultimately supporting improved public services in the region.
So, business investors in Indonesia, are you ready to face the changing landscape of tax and excise regulations in 2024? What strategies will you employ to stay ahead?
