Government Imposes 5 Percent Concessional VAT on Electricity Above 50 Units, Not 13 Percent

Kathmandu. The news circulated by mainstream media claiming that the government has imposed a 13 percent value-added tax (VAT) on electricity consumption above 50 units under the upcoming fiscal year 2083/84 budget is misleading, according to Nepal Fact Check.

The fact-checking body clarified that the government-introduced provision applies a concessional VAT rate of 5 percent, not the standard 13 percent reported by several media outlets.

The misleading reports emerged shortly after Finance Minister Dr. Swarnim Wagle presented the budget on Friday. Several online media platforms, including Onlinekhabar, Setopati, and Bizkhabar, published news suggesting that electricity consumption above 50 units per month would be subject to a 13 percent VAT, raising concerns over increased financial burden on consumers.

The claims quickly triggered public debate on social media, with users expressing concern over the apparent contradiction between the government’s push to promote electricity consumption and policies perceived as increasing costs for households.

However, Nepal Fact Check stated that these reports appear to have misinterpreted the budget provisions by overlooking the phrase “concessional rate” mentioned in the budget speech and instead assuming the standard VAT rate of 13 percent.

To verify the claim, Nepal Fact Check reviewed both the budget speech and the Economic Bill, 2083, submitted to Parliament as primary legal documents. Point 69(b) of the budget speech states that a concessional VAT rate will be applied to electricity consumption exceeding 50 units per month for end consumers, without specifying the exact rate.

Further clarification is provided in point 55 of the Economic Bill, 2083, under the amendment to the Value Added Tax Act, 2052. It specifies that electricity service providers shall collect VAT at a rate of 5 percent on the taxable value as defined under the Act and its regulations.

Based on these legal provisions, Nepal Fact Check concluded that the applicable VAT rate for electricity consumption above 50 units is 5 percent, not 13 percent as reported.

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