Budget 2024-25: VAT cancelled on vegetables and fruits, taxes increased on cigarettes and alcohol

KATHMANDU: Finance Minister Barsha Man Pun has introduced significant changes in the upcoming fiscal year’s budget, aiming to address consumer concerns and stimulate economic growth. Among the key highlights, the minister announced the cancellation of VAT on essential items such as potatoes, onions, and apples, which is expected to lead to a decrease in their prices.

This move comes in stark contrast to the previous fiscal year’s budget, where Finance Minister Prakash Sharan Mahat had imposed VAT on these goods to promote domestic production.

However, the implementation of VAT resulted in a surge in prices, particularly noticeable in items like onions, where the price skyrocketed from Rs 40 to Rs 90 per unit. Given that over 90 percent of onions consumed in Nepal are imported, the decision to cancel VAT aims to alleviate the burden on consumers.

Despite the relief provided to consumers, the budget also includes measures to increase taxes on items such as cigarettes, alcohol, and beer. This tax hike is expected to lead to an increase in the prices of these items, aligning with the government’s efforts to discourage consumption of harmful products and promote public health.

Furthermore, the budget introduces adjustments to customs duty and excise duty on imported raw materials used by various industries, including medicines, induction cookers, thread, helmets, incense sticks, sanitary pads, cashew, and peanut processing.

While the duties on these raw materials have been reduced to support industrial growth, corresponding increases have been imposed on the importation of finished goods to protect domestic industries.

In a bid to attract foreign investment, the budget includes provisions to reduce income tax on interest payments made to foreign banks and financial institutions, aiming to create a more favorable environment for foreign capital inflow.

Additionally, the introduction of a model for double tax exemption agreements in the development budget is aimed at enhancing investment inflow from potential investment countries.

Overall, the budget for the next fiscal year reflects a balance between consumer relief measures, taxation adjustments, and initiatives to stimulate economic growth and attract foreign investment, signaling the government’s commitment to fostering a resilient and dynamic economy.