Non-Fiscal Facilities Imposed on Industry Sector

Back to News

By Arien Kartika Sari

Following the implementation of Law No. 3 Year 2014 on Industry, the government has issued Government Regulation No. 2 of 2017 on Development of Industrial Infrastructure and Facilities (“GR 2/2017”). This regulation is focused on industrial standardization, the National Industry Information System, and non-fiscal facilities granted to Industrial and Industrial Zone Companies.

In the spirit of creating a competitive industry through standardization of industrial goods and services, GR 2/2017 sets out the rules for industrial standardization that is implemented in the form of the Indonesian National Standard (Standar Nasional Indonesia or “SNI”), Technical Specification and Procedural Guidelines.

SNI is typically a voluntary certification, unless stipulated otherwise by the relevant technical authorities. The Ministry of Industry is in charge of supervising all aspects of the implementation of the voluntary and mandatory SNI, either at the factory or market-level. If the report of such supervision shows the industrial goods and/or services to be non-compliant with the mandatory SNI, Technical Specification and/or Procedural Guidelines, the business is obliged to suspend production of such goods/services within 3 days since the notification and to remedy such non-compliance. If such non-compliance is found at the market-level, the business is obliged, at their own cost, to withdraw the sale of such goods within 1 month of the notification, and/or stop any importation of the goods within 3 days. If the goods have a high risk of making a direct negative impact on the safety of consumers, the authority is entitled to immediately withdraw the product from the market. Violation of this obligation may result in an administrative fine of up to IDR 1 billion, temporary closure, suspension, and/or revocation of the industrial license.

On the issue of the National Industry Information System, GR 2/2017 stipulates that every Industrial Company, as well as Industrial Zone Company, must routinely submit data and information regarding their business to the minister of local government through the National Industry Information System. The Minister then will publish such information, except for any information that may harm the Industrial Companies to protect them from a violation of intellectual property and unfair business competition.

Under GR 2/2017, non-fiscal facilities may be given to any industrial companies who have obtained an Industrial Business License (Izin Usaha Industri) or an Industrial Zone Business License (Izin Usaha Kawasan Industri), and fully paid all tax obligations. Other criteria may apply, such as the commitment to externalize the concept of green industry, export-orientation, location in rural or border areas, optimalization of the use of local goods and/or services, etc. The non-fiscal facilities as set forth in this regulation are as follows:

1. training to improve knowledge and skills of the human resources;
2. professional competency certification;
3. transfer of production rights of a technology for which the patent license is held by the central and/or regional government;
4. supervision of safety for operational activities to ensure the smooth operation of production process (if its considered to be a vital national object);
5. for small and medium-sized businesses, product certification and/or technical standard;
6. development of physical infrastructure for small and medium-sized businesses and Industrial Zone Companies located in rural or border areas; and/or
7. promotional assistance of production results or location.

To apply for non-fiscal facilities, Industrial Companies or Industrial Zone Companies must submit an application to obtain non-fiscal facilities to the Ministry of Industry, technical ministry, governor, and/or regent or mayor as the grantor of such facilities.

Article supplied by BUDIARTO Law Partnership