Budget makes public transport more expensive as taxes on commercial vehicles rise

KATHMANDU: Nepal’s new budget has drawn criticism from transport operators and automobile businesses after introducing higher taxes on commercial and public transport vehicles, a move expected to increase vehicle prices and raise operating costs across the transport sector.

Unlike many previous finance ministers who largely avoided increasing taxes on public transport vehicles due to their direct impact on commuters, Finance Minister Dr. Swarnim Wagle has introduced new levies on both electric and fuel-powered commercial vehicles through the fiscal year 2083/84 budget.

Industry stakeholders warn that the new tax structure could slow the rapid growth of electric commercial transport and increase the cost of passenger and cargo transportation.

New Tax Raises Cost of Commercial EVs

The government has imposed a new Clean Infrastructure Investment Fee of up to 10 percent on commercial electric vehicles (EVs), in addition to existing customs and excise duties.

As a result, taxes on commercial EVs have increased by as much as 16 percent in some categories.

Electric buses and microbuses face tax increases ranging from 7 to 12 percent, while double-cab electric pickup vehicles will see tax increases of up to 16 percent.

Automobile dealers estimate that the retail price of a single-cab electric pickup, currently sold for around Rs 3.39 million, could increase by Rs 150,000 to Rs 175,000 due to the new levy.

For double-cab electric pickups, prices are expected to rise by as much as Rs 250,000.

Impact on Growing EV Transport Market

The tax hike comes at a time when Nepal has been witnessing rapid adoption of electric commercial vehicles.

Brands such as Changan, Foton, KAMA, Tata Motors, and DFSK have significantly expanded their electric microbus offerings in Nepal.

Electric microbuses are increasingly operating on major routes, including the BP Highway, while schools, colleges, and transport operators have adopted EVs due to their substantially lower operating costs.

The growing shift toward electric mobility had begun reshaping Nepal’s public transport sector, reducing the dominance of traditional fuel-powered vehicles and creating strong demand for commercial EVs.

Industry representatives now fear that the higher tax burden could slow that transition.

Fuel-Powered Commercial Vehicles Also Affected

The budget does not only affect electric vehicles.

Taxes on fuel-powered commercial vehicles have also increased, with 15- to 25-seat minibuses facing a 14 percent tax increase, while refrigerated transport vans (reefer vans) will see a 4 percent increase.

Transport entrepreneurs argue that higher acquisition costs will eventually be reflected in transportation and logistics expenses.

Government Introduces Uniform Tax Structure

A major policy change in the budget is the replacement of the existing seat-based tax system for minibuses and microbuses.

Under the new arrangement, diesel, petrol, and electric minibuses carrying 11 to 25 passengers will be subject to a single tax category regardless of seating capacity.

Previously, vehicles with 11–14 seats attracted higher taxes, while those with 15–25 seats benefited from comparatively lower rates.

Government officials say the reform was introduced to eliminate widespread disputes over seat classification.

Authorities had long alleged that some importers and operators manipulated vehicle registrations by declaring 14-seat vehicles as 15-seat models or 10-seat vehicles as 11-seat models to secure lower tax rates.

The Office of the Auditor General had also highlighted cases where tax liabilities may have been reduced through seat-capacity misclassification and recommended recovery measures.

Changes in Excise Duty Structure

The government has fixed excise duty on internal combustion engine (ICE) passenger microbuses at 40 percent.

For larger buses with seating capacity above 25 passengers, excise duty has been set at 5 percent.

Previously, diesel microbuses carrying 11–14 passengers were subject to 55 percent excise duty, while those with 15–25 seats paid 35 percent.

The new system standardizes taxation across the category.

Significant Changes for Electric Buses

The budget has also revised tax treatment for electric buses.

For electric buses carrying more than 25 passengers, the government has removed the 1 percent customs duty that previously applied.

However, electric buses with seating capacity between 11 and 25 passengers will now face a 10 percent tax, compared with only 1 percent customs duty under the previous regime.

In addition, all categories of electric buses will now be subject to a 2.5 percent Clean Infrastructure Investment Fee.

The same 2.5 percent levy will also apply to electric three-wheelers.

Concerns Over Public Transport Costs

Industry leaders argue that increasing taxes on vehicles used for public transportation and freight movement could ultimately affect consumers through higher transport costs.

While the government maintains that the new tax measures are intended to strengthen public finances and create resources for infrastructure development, businesses warn that the policy may undermine Nepal’s efforts to accelerate electric mobility and modernize public transportation.

The full impact of the new tax regime will become clearer in the coming months as importers adjust prices and transport operators assess the economic viability of expanding their fleets under the revised taxation structure.