New directive imposes 5% VAT on household electricity above 50 units and 13% for other consumers

• Nepal’s Inland Revenue Department issued the Electricity Services VAT Collection Directive, 2026, effective 17 July 2026. Households consuming up to 50 units a month remain VAT-exempt; once consumption exceeds 50 units, 5% VAT applies only to the units above the threshold, not the whole bill.
• Non-domestic users — industrial, commercial and institutional consumers — pay 13% VAT on the full value of their electricity bill. Electricity traded between licensed electricity businesses stays exempt, but suppliers issuing VAT invoices must register for VAT, which lets the Nepal Electricity Authority reclaim input tax on its purchases.
• Around three million low-use customers are unaffected, while roughly 1.2 million households using 51–150 units and 250,000 using 151–250 units will see modest increases. Officials say the effective rate stays below 5% for most households up to 300 units; critics warn it may discourage the government’s own electrification drive.

Extended article

Nepal has brought household and commercial electricity within the VAT net through the Electricity Services VAT Collection Directive, 2026, effective from 17 July 2026 (the start of Shrawan). The measure was first introduced through the Finance Bill, 2026, which amended the VAT Act to exempt household consumption of up to 50 units per month.

Under the directive, a household using 50 units or fewer pays no VAT. Once monthly consumption exceeds 50 units, 5% VAT applies only to the units above the threshold. The Nepal Electricity Authority (NEA) illustrated this: a household using 45 units is exempt; if it uses 60 units the next month, 5% VAT applies only to the additional 10 units. The concession is exclusive to households.

All non-domestic categories face 13% VAT on the entire bill. Electricity traded between licensed electricity businesses remains exempt, and because suppliers now issue VAT invoices they must register; the NEA confirmed it has registered, upgraded its billing software, and can claim input-tax credits on equipment and materials. The NEA estimates over three million customers consume up to 50 units and are unaffected, while about 1.2 million households (51–150 units) and 250,000 (151–250 units) will pay more. Finance Minister Swarnim Wagle emphasised the first 50 units stay free and the effective rate stays below 5% up to 300 units; energy experts cautioned any added cost risks undercutting Nepal’s push toward electric cooking, pumping and transport.

External links

• The Kathmandu Post — households over 50 units to pay 5% VAT, others 13%
• myRepublica — households using power over 50 units now face 5% VAT