Government Revises VAT Proposal on Electricity Charges, Including Relief Measures
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Officials have indicated that the government plans to modify its initial decision to impose tax on electricity charges.
The original decision required a 5% value-added tax (VAT) on electricity charges for consumption exceeding 50 units per month, which faced widespread criticism.
Recently, Finance Minister Swarnim Wagle spoke at the House of Representatives on Ashad 11 (June 26), assuring that the adjustments would be made so that the final consumer would not bear a higher burden.
According to Amrit Lamsal, spokesperson for the Ministry of Finance, the finance minister’s proposal to simplify the VAT application on electricity charges is now in the final stages.
“The Inland Revenue Department has prepared the directives, which will be made public once approved,” he stated.
Finance Minister Wagle noted ongoing discussions with the Energy Minister on this matter, adding, “Decisions in the interest of consumers and the general public will be announced from Shrawan 1 (July 16).”
July 16 falls on Friday. Assistant spokesperson of the Ministry of Energy, Shaligram Bhandari, stated he is not aware of details, as this issue falls under the Finance Ministry’s jurisdiction.
He said he is unaware if discussions have taken place at the ministerial level.
’Final Preparations’ Underway at the Ministry of Finance
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An official of the Inland Revenue Department confirmed that the department has sent the directives to the ministry.
The official added that a decision could be made within a few hours.
However, even with the directive sent, specifics of any amendments are not yet clear.
“Likely, the ministry will finalize this issue today and provide an update in a few hours,” the official added.
Finance Ministry spokesperson Amrit Lamsal has also not provided definitive information on the matter.
During the budget presentation for fiscal year 2083/84 BS (2026/27 AD), Finance Minister Wagle had stated, “A 5% value-added tax will be applied with reliefs for final consumers consuming more than 50 units of electricity monthly.”
Officials confirmed that the decision to levy 5% VAT on usage beyond 50 units had been made earlier.
Plan to Either Cancel VAT or Broaden Its Coverage?
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Following intense criticism, Finance Minister Wagle had committed to adjusting this proposal and indicated he was exploring alternatives during the parliamentary session.
“If a 5% VAT must be levied, we will increase the free consumption limit to ensure 95% of Nepalese consumers remain unaffected,” Minister Wagle said.
An official from the Inland Revenue Department stated that senior officials are currently discussing the finalization of this decision with the Ministry of Finance.
A Finance Ministry official added, “It appears the decision will remain within the bounds of the minister’s parliamentary statement.”
Analysis of Benefits and Drawbacks
Nepal Electricity Authority has approximately 5.8 million customers nationwide.
Customers with monthly consumption below 20 units currently pay a minimum fee.
According to Haribahadur Khatri, information officer of the Electricity Regulatory Commission, meters with 5 ampere capacity have a fixed minimum monthly tariff of NPR 30, which does not include consumption charges.
Nepal Electricity Authority reports that roughly 1.7 to 1.8 million customers fall under this category.
The Authority does not have exact figures on customers whose monthly consumption exceeds 50 units.
However, officials estimate that this number could range between 4 to 4.5 million, including industrial consumers.
Some analysts believe the government aims to collect VAT from domestic consumers whose monthly consumption surpasses 50 units.
However, the exact number of such consumers is unclear and estimates vary among current and former officials.