FNCCI demands withdrawal of VAT on electricity tariffs

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has demanded that the government immediately remove the value-added tax imposed on electricity tariffs.

The federation said the tax, in effect since the current fiscal year 2083/84, has raised production costs for industries. Since electricity is a basic input for industrial production, trade and tourism, the added tax has directly affected operating costs, cash flow and competitiveness, it said.

According to the FNCCI, the burden has fallen heavily on energy-intensive industries, businesses dealing in VAT-exempt transactions, small and medium enterprises, and the hotel and tourism sector. Although the law provides for input tax credit, the refund and adjustment process, along with the nature of some transactions, means not all businesses can immediately or fully offset the tax paid on electricity.

This has put pressure on working capital and affected new investment, industrial expansion and job creation, the federation said.