Energy and Finance Ministers Reach In-Principle Agreement to Remove VAT on Electricity

The government is preparing to remove the Value Added Tax (VAT) on electricity, following an in-principle agreement between Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha and Finance Minister Dr. Swarnim Wagle. During discussions, Minister Shrestha proposed scrapping VAT on electricity, and Finance Minister Wagle expressed support for the proposal. The two ministries have consequently reached an in-principle understanding to move ahead with the process. VAT on electricity was introduced from the beginning of the current fiscal year. Under the existing provision, household consumers using more than 50 units per month are subject to 5% VAT, while commercial and other non-household consumers are subject to 13% VAT. The proposed removal still requires the necessary formal government and administrative processes before it can be implemented. Reports indicate that the Cabinet will need to make a formal decision to reverse the provision.