Following widespread public criticism over the imposition of Value Added Tax (VAT) on electricity bills, the government has sought a formal legal interpretation to ensure consumers are not unfairly burdened.
The Nepal Electricity Authority (NEA) has requested an official opinion from the Inland Revenue Department (IRD) after Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha instructed the utility to identify a consumer-friendly solution while complying with existing laws.
The NEA has specifically asked whether VAT should apply to electricity consumed during the month of Asar but billed in Shrawan, when the new tax provision came into effect. It has also sought clarification on whether the minimum demand charge is subject to VAT.
According to the NEA, any necessary adjustments to future electricity bills will be made based on the IRD’s official legal interpretation, with the aim of addressing consumers’ concerns.
Under the Economic Act, 2083, VAT on electricity services came into effect from Shrawan 1. However, controversy arose after consumers received bills in Shrawan that included VAT on electricity consumed before the new law became effective.
The current provision requires consumers using more than 50 units of electricity per month to pay a 3 percent VAT. The government is now awaiting the IRD’s legal opinion to determine whether the tax should apply retrospectively to electricity consumed before the law’s implementation.
