Kathmandu. The government is preparing to remove the Value Added Tax (VAT) that has been levied on electricity tariff since the current fiscal year. The VAT of 5 percent for domestic customers and 13 percent for industrial and other non-domestic customers is being removed within two months of its implementation.
On Sunday evening, Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha and Finance Minister Dr. Swarnim Wagle held a meeting in principle to remove the VAT on electricity, according to sources at the Ministry of Energy.
According to sources, the Ministry of Finance and Energy reached an agreement after the Prime Minister was also positive to remove the VAT on electricity. Now, after the decision from the next cabinet meeting, the process of removing VAT on electricity will move forward.
The government had made provision for VAT on electricity service through the budget of the current fiscal year 2083/84. According to this, domestic customers will have to pay 5 percent VAT and other customers will have to pay 13 percent VAT if they consume more than 50 units of electricity per month.
Earlier, the VAT which was to be implemented from July was also deducted on the bills of June. After this, the Nepal Electricity Authority had sought a response from the Inland Revenue Department. The department had submitted a reply that it would be applicable only from July. It updated its billing system accordingly.
However, it was opposed saying that the imposition of VAT on electricity would increase the cost of industry and business along with domestic consumers. In particular, the industrialists had been saying that imposing 13 percent VAT on electricity would increase the cost of production and it would affect the price of goods and services.
According to sources in the Ministry of Energy, after the implementation of the decision to remove VAT, the VAT collected on electricity tariff from July will also be calculated. The amount collected earlier will be adjusted in the upcoming electricity bill. Now, after the formal decision of the cabinet, the system of not charging VAT on electricity tariff will be implemented again.
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