Finance Minister Dr. Swarnim Wagle’s Claims About VAT Multi-Tier System Found to Be Incorrect

The government has implemented a multi-tier system for Value Added Tax (VAT) under Clause 55 of the Economic Bill. Finance Minister Dr. Swarnim Wagle claimed that the government did not impose a multi-tier system, but only applied reduced rates on electricity and ride-sharing services in line with international practice. The Economic Bill grants the government the authority to enforce a multi-tier VAT system at any time by publishing a notice in the Nepal Gazette without increasing the tax rate. Kathmandu, 17 Jestha.

Finance Minister Dr. Swarnim Wagle has provided misleading information regarding the application of a multi-tier VAT system. He stated that the government levied VAT on electricity only at the reduced rate and did not apply any higher rates. He said, “No rate above this is applicable; the multi-tier system has not been implemented by publishing a notice in the Gazette,” however, Clause 55 of the Economic Bill clearly includes provisions for a multi-tier VAT system.

The Finance Minister also mentioned that the government is considering concerns about the impact on certain sensitive goods. He said, “We have not formally implemented the multi-tier system, and this process will not proceed without proper study.” Nonetheless, under Clause 55 of the Economic Bill, a new 5 percent rate has been applied to electricity and ride-sharing services, which is not merely a reduced rate as he claimed.

There appears to be a discrepancy between the Finance Minister’s statements and the provisions stipulated in the Economic Bill. According to Clause 55, the Government of Nepal can establish a multi-tier VAT system without increasing the tax rate by issuing a notice in the Nepal Gazette, and can define taxable goods and services accordingly.