Nepal to Impose 13% VAT on Electricity Consumption

The government has announced that it will impose Value Added Tax (VAT) on electricity consumption.

Through the budget for the upcoming fiscal year, the government decided to levy a 13 percent VAT on electricity usage.

Under the new provision, a concessional VAT rate will apply to end consumers using more than 50 units of electricity per month.

The budget also includes measures aimed at promoting the information technology sector as a new engine of the national economy. Income earned from the export of IT services will receive a 50 percent tax exemption.

In addition, the budget provides a 100 percent tax exemption on sweat equity received by workers in the information technology sector while calculating taxable income.

The government has also imposed an “internal production promotion fee” on the import of certain goods into Nepal. Development finance institutions fully owned by friendly nations and established on a non profit basis will also be exempt from income tax on interest earned from loan investments in Nepal.

The budget further announces a full income tax exemption for the first 10 years for those establishing new cinema halls outside metropolitan and sub metropolitan cities. It also states that Nepal will review the sensitive list under the South Asian Free Trade Area (SAFTA) agreement in line with changing regional trade conditions.

To support the expansion of education and health infrastructure in remote areas, the government will impose a minimum equity fee on private sector education and health services.

Finance Minister Dr. Swarnim Wagle said that customs duties on electric vehicles, which were previously based on peak power capacity, will now be determined on the basis of value. The government has also introduced a clean infrastructure investment fee at import points to support domestic EV production, charging station construction, and battery management.

The budget also mentions that the government will encourage the production of quality spirits and maturation processes to promote the export of Nepali branded alcoholic beverages.