Government Prepares to Remove VAT on Electricity
Simara: The government is preparing to roll back the Value Added Tax (VAT) on electricity, which was introduced in the budget for the current fiscal year. The decision comes after widespread complaints from general consumers and business owners regarding the added financial burden.
According to sources at the Ministry of Energy, an agreement in principle was reached during a high-level meeting on Sunday evening between Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha and Finance Minister Dr. Swarnim Wagle. Both ministries are aligned on the decision, and the Prime Minister has also given a positive signal toward the move.
Under the fiscal budget policy, the government had placed electricity under VAT rules. Household customers consuming over 50 units per month were required to pay a 5% VAT, while other commercial customers faced a 13% tax. Consumers and business leaders strongly opposed the decision, arguing that it raised household cooking expenses and pushed up production costs for local industries, driving market prices higher.
Once the Cabinet formally approves the proposal, legal steps will be initiated to remove the tax. The Ministry of Energy confirmed that any VAT collected from customers since the start of the fiscal year will be adjusted against their upcoming electricity bills. Once the formal decision is implemented, electricity bills will return to being tax-free.
