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🇳🇵 Nepal /Economy & Trade

Revised tax slabs threaten EV boom in Nepal

From Kathmandu Post · () English

Summarized and contextualized by DistantNews.

At a glance

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  • Nepal's new tax policy for fiscal year 2026-27 has alarmed electric vehicle importers and dealers, who predict significant price increases and a setback for clean transport.
  • The government replaced excise duty with a Clean Infrastructure Investment Fee (CIIF), ranging from 2.5% to 130%, alongside customs duty, a road construction fee, and VAT.
  • Industry representatives criticize the revised structure for introducing uncertainty, with tax rates fluctuating based on customs value and exchange rates, potentially making expensive EVs much costlier.

Nepal's government has introduced a new tax policy through its budget for the fiscal year 2026-27, sparking sharp concern among electric vehicle (EV) importers and dealers. They argue the revised structure will substantially increase vehicle prices, undermining the nation's transition towards cleaner transportation.

The increase may not be very large for entry-level vehicles, but the higher the vehicle price, the higher the tax burden. Expensive electric vehicles will become much more expensive under the new system.

— Dhruba ThapaExplaining the impact of the new tax structure on different EV price points.

The government has replaced the previous excise duty on EVs with a Clean Infrastructure Investment Fee (CIIF), which varies from 2.5 percent to a steep 130 percent, depending on the vehicle's customs value. This is in addition to a fixed 20 percent customs duty, a 5 percent road construction fee, and 13 percent value-added tax. Automobile dealers estimate that these changes could raise EV prices by anywhere from Rs200,000 to over Rs10 million, with higher-priced vehicles facing the most significant tax burden.

The tax system has become even more unstable. Vehicle prices may now fluctuate in the same way as gold or fuel prices because exchange-rate movements can push a vehicle into a different tax bracket.

— Dhruba ThapaCriticizing the unpredictability of the revised tax system.

While the government defends the change, stating the previous system based on motor peak power was controversial due to importers manipulating declared ratings, industry representatives find the new approach creates greater uncertainty. They had urged for a predictable tax framework to support investment in the growing EV sector. Dhruba Thapa, former president of the NADA Automobiles Association of Nepal, noted that the tax system has become even more unstable, with prices potentially fluctuating like gold or fuel due to exchange-rate movements pushing vehicles into different tax brackets. Gaurav Sharda, director of SPG Automobiles, suggested taxes should be determined in foreign currency to mitigate the impact of the Nepali rupee's weakening against major currencies.

In recent years, the Nepali rupee has weakened while the US dollar and other foreign currencies have strengthened. When the exchange rate changes, the value of a vehicle in Nepali rupees also changes. That raises questions about how tax rates will be applied and creates uncertainty for businesses.

— Gaurav ShardaIllustrating how exchange rate fluctuations create uncertainty under the new tax system.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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