Refunds uncertain after government rolls back equity tax on education and health services

Nepal's government has suspended a recently implemented 3% parity tax on education and healthcare services, a move that has left taxpayers uncertain about the fate of collected revenue. Prime Minister Balendra Shah announced the rollback on Tuesday, just days after the levy took effect, amid widespread public criticism over the added financial burden.

Despite the prime minister's announcement, the tax's legal status remains in limbo. The levy was introduced through the Finance Act, and its withdrawal requires formal Cabinet approval and publication in the Nepal Gazette. Finance Minister Swarnim Wagle confirmed the tax's suspension and stated that a withdrawal proposal is ready, pending Cabinet decision.

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The proposal for the withdrawal of the tax has been prepared and it will be implemented after Cabinet approval. The issue of refunds will also depend on the Cabinet’s decision. If the Cabinet decides to return the collected amount, taxpayers will receive refunds. Otherwise, it will remain with the government.

Until the formal withdrawal, the 3% tax is legally enforceable, creating confusion for taxpayers, government officials, and tax authorities. An official from the Finance Ministry indicated that refunds would depend on the Cabinet's decision, while the Inland Revenue Department awaits official instructions. The department has not yet received directives to stop collection, and the question of refunds is contingent on the formal repeal of the provision.

The prime minister explained the tax was initially intended to mobilize resources for improving services in remote areas, supporting marginalized communities, expanding health insurance, and broadening the tax base. He assured that public concerns are taken seriously and the government is committed to rectifying decisions that do not meet citizen expectations.

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Legally, the three percent parity tax on education and healthcare services is still in force. We have not received any instruction to stop collecting the tax. The question of refunds does not arise until the provision is formally withdrawn.