Ethanol as a Fuel Blend: Is It Subject to Excise?

The government is reportedly planning to mandate the use of ethanol as a 10% blend in fuel (E10). This plan was announced by the Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia.

The policy has sparked debate, with many parties raising questions for various reasons. Previously, it was reported that Pertamina had already blended ethanol into its Pertamax Green 95 fuel at a 5% ratio.

Ethanol as an Excisable Item

Did you know that ethanol, or ethyl alcohol (ethanol), is classified as an excisable item? This is regulated under the Minister of Finance Regulation (PMK) Number 160 of 2023.

Excise is a levy imposed by the government on goods with certain characteristics. Payment is made by applying for excise stamps through the Directorate General of Customs and Excise (DJBC).

According to this regulation, ethanol is an organic compound with the chemical formula C₂H₅OH, produced through fermentation or distillation, in the form of a clear and colorless liquid.

The regulation not only governs excise on ethanol but also on Alcoholic Beverages (MMEA) and Alcoholic Concentrates (KMEA).

Reasons for Imposing Excise

According to the Directorate General of Customs and Excise, and as regulated in the Excise Law, a product is designated as an exciseable item because it has certain characteristics, including:

• Its consumption needs to be controlled
• Its distribution needs to be monitored
• It has negative impacts on society or the environment
• Excise is necessary to ensure fairness and balance

Based on these criteria, the government has designated several items as excisable goods. In addition to ethanol, MMEA, and KMEA, other excisable goods (BKC) include tobacco products, other processed tobacco products (HPTL), and packaged sweetened beverages (MBDK).

Ethanol Excise Rate

The excise rate for ethanol stipulated in PMK 160/2023 is the same for both domestic production and imports, set at IDR 20,000 per liter.

This volume unit is measured at a temperature of 20 degrees Celsius.

MMEA Excise Rates:

Ethanol Content	Excise Rate
	Domestic Production	Imported Production
5%	IDR16.500/ liter	IDR16.500/liter
>5%≤20%	IDR42.500/liter	IDR53.000/liter
>20%≤50%	IDR101.000/liter	IDR152.000/liter

KMEA Excise Rates:

Concentrate Type	Excise Rate
	Domestic Production	Imported Production
Liquid	IDR 228.000/ liter	IDR 228.000/ liter
Solid	IDR 1.000/liter	IDR 1.000/liter

The excise rate for ethanol differs from that of MMEA and KMEA. For MMEA, the rate is determined based on ethanol content and place of production. For KMEA, the rate is based on the type of concentrate and place of production.

Ethanol Excise Exemption

In fact, the regulation does not explicitly state whether ethanol used as a fuel blend is included in the category of excisable goods.

However, according to Bisnis.com, in May 2025, the Ministry of Energy and Mineral Resources (ESDM) proposed that the government exempt fuel-grade ethanol used as a fuel blend from excise.

Even so, the proposal was hindered by the Indonesian Standard Industrial Classification (KBLI) provisions. At that time, the KBLI number for fuel still overlapped with the KBLI for ethanol used in the food and beverage industry.

Under the Director General of Customs and Excise Regulation Number PER-16/BC/2024, the government has actually provided an excise exemption for ethanol under the following conditions:

• Ethanol is used as a raw material or auxiliary material in the production of final goods that are not excisable goods (BKC).
• Ethanol is used as a raw material or auxiliary material in the production of final goods that are not BKC through an integrated production process.
• Ethanol is used for research and development purposes in science and technology.
• Ethanol is used for social purposes, such as healthcare services or disaster relief.

Conclusion

The obligation to blend ethanol into fuel is a government measure to encourage a transition to green energy and reduce dependence on fossil fuels. However, from a taxation perspective, challenges arise because ethanol is still classified as an excisable good under PMK 160/2023.

Nevertheless, an excise exemption for fuel-grade ethanol can serve as a solution to ensure that renewable energy policies are not burdened with additional levies. Thus, synergy between fiscal policy and energy policy is key to ensuring the effective implementation of biofuels without hindering the efficiency of the national energy industry. (ASP)