Nepal government considers reversing newly imposed electricity VAT

The Nepalese government is weighing the removal of a value-added tax on electricity that was introduced in one outlet budget, imposing a 5% rate on household consumers and 13% on other users. Energy Minister Biraj Bhakta Shrestha confirmed that he and Finance Minister Swarnim Wagle reached an in-principle understanding to scrap the levy after widespread public dissatisfaction. The tax brought over 2.6 million households into the VAT system, with varying consumption levels cited by the Nepal Electricity Authority.

While the government originally defended the measure as a way to fund energy-sector projects, critics argue it raises costs for middle-income families and may distort usage patterns. The Finance Ministry must now advance the proposal for Cabinet approval, and a NEA-led committee is reviewing tariff structures, including seasonal pricing, to mitigate the tax’s impact.