Govt revises liquor customs duty amid controversy over ‘budget printing error’

KATHMANDU: The Nepal government has once again stirred debate by revising customs duties on liquor just a day after unveiling the 2025/26 fiscal budget, citing a “printing error.” The initial budget, presented by Deputy Prime Minister and Finance Minister Bishnu Paudel on May 29, proposed a progressive tax policy, setting the customs duty on all types of liquor—rum, whiskey, vodka, and others—at 100% of their value.

This replaced the earlier flat rate of NPR 2,000 per liter, aiming to impose lower taxes on cheaper liquor and higher taxes on premium brands. However, on May 30, the revised economic bill presented to the House of Representatives adjusted the duty to “NPR 2,000 per liter or 100% of the value, whichever is higher,” effectively ensuring that even low-value liquor remains costly.

The revised rates, detailed in a chart from Kantipur, outline the new structure:

For liquor valued up to NPR 2,000 (e.g., beer at NPR 200), the duty is NPR 2,000 per liter, translating to 0% of the value for beer but 100% for liquor at NPR 2,000.

For liquor valued at NPR 3,000 (e.g., wine), the duty is NPR 3,000 per liter (100% of value).
For premium liquor like rum, whiskey, and vodka valued at NPR 9,000, the duty is NPR 9,000 per liter (100% of value).

For liquor valued at NPR 60 (e.g., local distilled spirits), the duty remains NPR 2,000 per liter, equating to 30% of the value, while the effective rate on NPR 60 liquor is 3,333%.

The change came after domestic liquor producers lobbied Finance Minister Paudel, arguing that the initial 100% value-based duty would harm their industry by making imported low-value liquor too competitive. Sources from the Ministry of Finance confirmed that the revision was made following these discussions.

Director General of the Customs Department, Mahesh Bhattarai, attributed the change to a “typing error” during the bill’s printing. “The policy decision was to adopt a progressive customs duty on liquor, but a typing error occurred during printing, which was immediately corrected,” Bhattarai said. He insisted there was no ill intent, emphasizing that the certified bill and the one presented in Parliament are identical.

Bhattarai further explained that the progressive tax system aims to protect domestic industries and increase revenue by aligning duties with liquor value. “Previously, a flat rate of NPR 2,000 per liter applied regardless of value, which wasn’t scientific. We’ve now adopted a progressive system to protect our industries while ensuring fair revenue collection,” he said, noting that this practice is common in other countries.

However, experts have raised concerns over the government’s handling of the revision. Vidyadhar Mallik, former Finance Secretary and coordinator of the High-Level Committee for Tax System Reform, cautioned that such adjustments must be handled with transparency. “Tax rate changes require extreme sensitivity. Claiming a printing error isn’t enough—it raises public suspicion and undermines government credibility,” Mallik said. He urged the government to communicate such corrections in a way that reassures citizens.

Under the revised rates, liquor valued at NPR 2,000 or less will incur a customs duty of NPR 2,000 per liter, while those above NPR 2,000 will be taxed at 100% of their value. For example, a bottle valued at NPR 1,500 will still attract a NPR 2,000 duty, while one valued at NPR 5,000 will incur a NPR 5,000 duty.

The Ministry of Finance claims this structure will protect domestic liquor industries and boost overall revenue collection. However, businesses argue that the revised rates eliminate the price advantage for lower-value imported liquor, impacting market dynamics. The controversy has sparked calls for greater accountability in Nepal’s tax policy revisions.