Nepal Raises Taxes on Electric Vehicles, Increasing Consumer Costs

KATHMANDU: The government has significantly revised Nepal’s tax structure for electric vehicles (EVs) through the budget for the upcoming fiscal year, a move that is expected to increase vehicle prices and place additional financial pressure on consumers.

Finance Minister Dr. Swarnim Wagle unveiled the new policy while presenting the national budget in Parliament on Friday.

Under the previous system, taxes on electric vehicles were determined based on motor peak power, with customs duty, excise duty, road construction fees, and Value Added Tax (VAT) applied accordingly. The government has now replaced the motor power-based system with a valuation-based tax regime, under which taxes will be calculated according to the customs value of the vehicle.

Industry stakeholders say the change will lead to higher prices across most EV segments. Depending on the model, vehicle prices are expected to rise from around Rs. 100,000 for entry-level cars to more than Rs. 4 million for premium models.

According to the new Economic Bill, all electric cars will now be subject to a uniform customs duty of 20 percent. Previously, customs rates varied between 15 percent and 80 percent depending on vehicle specifications.

The government said the decision was made to address ongoing disputes and inconsistencies surrounding the classification of vehicles based on motor peak power.

In addition, the existing excise duty has been abolished and replaced with a new “Clean Infrastructure Investment Fee.”

Under the revised structure:

• Electric vehicles with a customs value of up to Rs. 2 million will face a 2.5 percent Clean Infrastructure Investment Fee.
• Vehicles valued between Rs. 2 million and Rs. 3 million will be charged 20 percent.
• Vehicles valued between Rs. 3 million and Rs. 4 million will face a 35 percent fee.
• Vehicles valued between Rs. 4 million and Rs. 5 million will be subject to a 90 percent fee.
• Vehicles valued above Rs. 5 million will be charged a steep 130 percent fee.

The government has retained the existing 5 percent road construction fee on all electric vehicles. The 13 percent Value Added Tax (VAT) will also continue to apply.

As a result of the changes, the total tax burden on entry-level electric vehicles has increased from 43 percent to 46 percent. For some mid-range models that previously faced a 63 percent tax burden, the rate has now risen to 70 percent. Electric vehicles valued up to Rs. 4 million will now face a total tax burden of approximately 92 percent.

The sharpest increase affects premium electric vehicles priced above Rs. 5 million. Tax rates on these vehicles have climbed from 156 percent to as much as 227 percent, representing a 71 percent increase in the overall tax burden.

The revised tax policy is expected to drive up the retail price of most electric vehicles in Nepal, potentially slowing the growth of the country’s EV market and making clean transportation less affordable for consumers.

Automobile industry representatives have expressed concern that higher taxes could discourage EV adoption at a time when Nepal has been promoting electric mobility as part of its transition toward cleaner energy and reduced dependence on fossil fuel imports.