Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The Government of Nepal provided tax exemptions worth nearly Rs 53 billion on customs revenue during the first six months of the current fiscal year 2025/26 (FY 2082/83 BS), according to data released by the Ministry of Finance Nepal.
The ministry reported that tax waivers totaling Rs 52.84 billion were granted on imports worth Rs 408 billion during the review period.
VAT exemptions dominate waivers
A major portion of the tax relief came through provisions of the Value Added Tax Act, 1996 (2052 BS). Imports worth Rs 216.02 billion that qualified for VAT exemption under Section 5(3) of the law received tax waivers totaling Rs 29.70 billion, the ministry said.
Diplomatic and institutional exemptions
Under provisions of the Customs Act, 2007 (2064 BS), imports worth Rs 597.5 million made under diplomatic facilities received customs exemptions amounting to Rs 482.9 million.
Similarly, goods worth Rs 80.8 million imported under other duty concession provisions of the same act received Rs 42.1 million in tax waivers.
Imports by non-profit public and community institutions, the Government of Nepal, and state-owned entities worth Rs 37.54 billion received Rs 9.5 billion in tax exemptions.
Large relief for development projects
The ministry’s data shows that imports made for project development under agreements signed with the government — either by project offices or their appointed contractors — received significant concessions.
Goods worth Rs 39.92 billion imported under such project agreements were granted Rs 14.97 billion in tax waivers.
SAFTA imports receive major concessions
Tax exemptions were also heavily concentrated on imports made under the South Asian Free Trade Area framework. Goods worth Rs 42.40 billion imported under South Asian Free Trade Area facilities received tax waivers totaling about Rs 27.69 billion, making it one of the largest single categories of relief.
Miscellaneous facilities and domestic tax relief
Under various other concession headings, imports worth Rs 140.78 billion received tax waivers amounting to Rs 17.40 billion, the ministry said.
By contrast, tax relief granted through the domestic revenue system was relatively small. The Inland Revenue Department Nepal provided tax concessions worth Rs 555.76 million to 3,477 taxpayers during the same period, in accordance with provisions of the Finance Act 2025 (2082 BS).
Long-standing debate over tax exemptions
Nepal has been providing more than Rs 100 billion in tax waivers annually, and the scale of such exemptions has repeatedly drawn scrutiny from policymakers and economists.
A report submitted earlier by a high-level economic reform commission led by former finance minister Rameshwor Khanal had raised serious concerns about the growing volume and effectiveness of such concessions. However, the latest figures suggest that the trend of granting large tax waivers has not declined, even as Khanal currently holds the finance portfolio.
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