Kathmandu, May 31: The government’s decision, introduced through the budget for fiscal year 2083/84 (2026/27), to impose Value Added Tax (VAT) on monthly electricity consumption exceeding 50 units is expected to affect ordinary consumers. The provision of a five percent VAT on electricity usage is likely not only to irritate consumers who are gradually becoming accustomed to using electrical appliances for household purposes but also to hinder the country’s plans to expand electricity consumption.
Through Section 55 of the Finance Bill presented to both houses of Parliament, Finance Minister Swarnim Wagle has proposed an amendment to the Value Added Tax Act, 2052 (1996), stating that “a tax at the rate of five percent shall be levied and collected on the taxable value of goods and services supplied to the final consumer in accordance with this Act and the regulations framed under it.” Likewise, in his budget speech, the minister announced that electricity consumption exceeding 50 units per month would be subject to VAT at a concessional rate.
For several years, the government has also been promoting the replacement of cooking gas with electric stoves by providing subsidies for electric cooking appliances. In particular, local governments have been implementing this campaign in collaboration with the Alternative Energy Promotion Centre. In addition, various organizations active in environmental protection and green energy promotion have been running similar programs. Stakeholders argue that the new budget provision will adversely affect households that have only recently begun to adopt greater electricity use.
Former Energy Minister Kulman Ghising has publicly opposed the government’s move. He stated that the decision to impose a five percent VAT on consumers runs contrary to the interests of the public, the goals of energy transition, and the national campaign to increase the use of clean energy produced domestically.
“At a time when the use of electricity for cooking, water heating, and other household purposes should be encouraged, the government appears to be punishing consumers by imposing an additional tax burden,” he wrote on social media. “Most customers who consume more than 50 units per month are ordinary household consumers.
“In such a situation, the decision to impose the tax will increase the monthly expenses of millions of families and make cooking more expensive.”
He believes the measure could reduce the use of electric stoves and other electrical appliances, pushing consumers back toward dependence on LPG gas. At a time when there have been calls to make electricity cheaper to expand consumption and to redirect subsidies currently provided to LPG toward electricity use, he argues that the government’s decision is inconsistent with the goals of national energy security, reducing the trade deficit, and building a green economy.
“Electricity tariffs should be made more equitable, progressive, and consumer-friendly; additional tax burdens should not be imposed,” Ghising wrote. “For the benefit of ordinary consumers, this additional five percent tax on electricity users should be withdrawn immediately.”
Biraj Gautam, Chief Executive Officer of the People, Energy, Environment and Development Institute, described the government’s move as regressive. “At a time when national and international support is being mobilized to encourage people to adopt green energy, protect the environment, and expand domestic electricity consumption, the government appears to be moving in the opposite direction,” he said.
Although there are no exact statistics on how many consumers will be affected by the VAT on electricity, millions of households are expected to be impacted. Of the approximately six million customers of the Nepal Electricity Authority, around 2.1 million consume less than 20 units of electricity per month. According to estimates by former NEA Executive Director Hitendra Dev Shakya, about two million households consume more than 50 units per month. There are around 6,000 industrial customers.
According to NEA electricity sales data, household consumers account for about 40 percent of total electricity sales revenue, while industrial customers contribute a similar share.
People’s News Monitoring Service.
Login to add a comment