Kathmandu, September 28
The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has called on the government to withdraw the value-added tax (VAT) imposed on electricity tariffs from the current fiscal year 2026/27, saying it has increased production costs.
The federation said electricity is a basic infrastructure for industrial production, trade and tourism, and that imposing an additional tax on it directly affects production costs, operating expenses, cash flow and overall business competitiveness.
According to the federation, businesses have complained that the additional VAT has increased costs, particularly for energy-intensive industries, businesses involved in VAT-exempt transactions, small and medium-sized enterprises, and hotels and tourism businesses.
Although the law provides for input tax credit, businesses have complained that not all enterprises are able to adjust the VAT paid on electricity immediately or in full due to the nature of their transactions and the tax adjustment and refund procedures.
The federation said this has put pressure on working capital and affected new investment, industrial expansion and job creation. It said the provision could also increase costs for consumers and add further pressure on overall prices.
At a time when industrialisation should be accelerated through increased domestic electricity consumption, import substitution and export promotion, the policy of increasing energy costs has added challenges to private-sector investment and production expansion, the federation said.
The federation has also called for a regular, quality and reliable electricity supply to industries and measures to minimise production losses and damage to machinery caused by voltage fluctuations, sudden power outages and other technical problems.
The federation urged the government to review the VAT provision on electricity, hold extensive consultations with the private sector, and simplify and make the tax adjustment and refund process transparent and time-bound.
It called on the government to withdraw VAT on electricity, arguing that electricity should be treated not merely as a source of revenue but as essential infrastructure for industrial production, tourism development, job creation and economic growth.
