Attorney General’s Office Affirms Validity of Internet Company Bills and Taxes Paid
March 21, Kathmandu – The Attorney General’s Office has clarified that the varying broadband internet service fees charged by internet service providers are legitimate, and accordingly, the telecommunications service charges also vary.
This follows the Revenue Investigation Department’s claim that Worldlink Communications had not paid the telecommunications service charges owed. The department submitted an investigative report to the District Government Attorney’s Office in Lalitpur. However, the office found the department’s legal interpretation unsubstantiated and decided not to proceed with the case.
The High Government Attorney’s Office endorsed the district office’s decision. Attorney General Savita Bhandari Baral upheld the decisions of both offices on Sunday, affirming that the decision not to initiate legal proceedings against Worldlink Communications was appropriate.
Previously, the Revenue Investigation Department had conducted similar investigations into other internet service providers but had not forwarded reports to the government attorney’s offices. In this instance, as the report on Worldlink was submitted, both district and high government attorneys concluded the evidence was insufficient.
Under Section 42(1)(ka) of the Telecommunications Act, 1997 (2053 BS), telecommunications service charges must be approved by the Nepal Telecommunications Authority (NTA). Consistent with this, the authority sets the rates for telecommunications service providers. The Financial Act also permits up to 50 percent of the fixed broadband internet bill to be allocated for maintenance fees on which telecommunications service charges (TSC) are not applied.
The regulatory body for internet services, Nepal Telecommunications Authority, has reiterated this interpretation. Regarding Worldlink, the authority informed the Revenue Investigation Department that for the fiscal years 2020/21 to 2024/25, monthly rates had been set at NPR 950 for 50 Mbps, NPR 1,050 for 75 Mbps, NPR 1,150 for up to 100 Mbps, and NPR 1,200 for 150 Mbps.
However, the Revenue Investigation Department argued that Worldlink should charge telecommunications service fees based on the rates set for Nepal Telecom and corresponding billing, claiming that Nepal Telecom had neither billed accordingly nor collected the revenue, implying tax evasion.
When the investigative report was submitted to the District Government Attorney’s Office in Lalitpur, officials from that office, the High Government Attorney’s Office, and the Attorney General concluded that the department’s legal interpretation was incorrect and inconsistent with decisions made by the regulatory authority.
According to Rule 15(1)(ja) of the Telecommunications Regulations, 1997 (2054 BS), up to 50 percent of fixed broadband fees can be charged as maintenance fees. The Financial Act also exempts telecommunications service charges on maintenance fees.
The Council of Ministers decreed on June 6, 2019 (Jestha 23, 2076 BS) that internet service providers could levy up to 50 percent of the total bill as support and maintenance fees, exempt from telecommunications service charges. In alignment with this, providers have not been charging TSC on 50 percent of the fixed broadband fees approved by the authority. However, Nepal Telecom had not collected support and maintenance fees until fiscal year 2020/21 and from FY 2021/22 onward has only charged customers 33 percent of the total billing amount as maintenance fees along with the applicable tax. This discrepancy in billing prompted the Revenue Investigation Department to argue that other companies should bill similarly, and initiated investigations into alleged tax evasion. Similar investigations have been reported previously on various companies.
The Attorney General pointed out that it is questionable to claim tax evasion solely based on differences in billing methods compared to Nepal Telecom.
The Attorney General’s opinion states, “Internet service providers’ total charges – including fees for internet service and maintenance – fall within the total rates set by the Nepal Telecommunications Authority. Overall, the amount comprises 50 percent maintenance fees and 50 percent internet service fees.” It further explained that with the legal provision exempting telecommunications service charges on maintenance fees, no evidence or grounds exist to substantiate claims of revenue leakage.
The Attorney General’s decision emphasizes that internet service providers’ offer of telecommunications service charge exemptions on maintenance fees aligns with existing government policy and the Financial Act.
Stakeholders believe this ruling will contribute to further regulation and accessibility in Nepal’s rapidly advancing internet sector in South Asia, especially in fixed broadband (FTTH) and high-speed internet services.
“By resolving ambiguities around internet revenue and telecommunications service charges, the office has offered a legal interpretation that protects consumers from additional financial burdens and safeguards the internet industry’s viability,” said a telecommunications expert.