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Understanding Nepal's EV Tax: Its Impact and Purpose

June 16, 2024

Understanding Nepal's EV Tax: Its Impact and Purpose

Understanding Nepal's EV Tax: Its Impact and Purpose

June 16, 2024

Understanding Nepal's EV Tax: Its Impact and Purpose

Buying a new EV in Nepal means understanding your EV taxes. Continue with the blog to learn about the latest EV tax in Nepal, the changes in recent years, and its effects on full EV adoption.

Understand the EV Tax in Nepal

Taxes are levied on the items when they are bought and sold. They are the major source of revenue for the country. Since most of the vehicles on the roads in Nepal are imports from other countries, the government of Nepal (GoN) applies several taxes, such as customs duty, excise duty, and value-added tax (VAT). Every electric vehicle is subjected to these EV taxes in Nepal.

Types of Vehicle Taxes in Nepal

Electric vehicles (EVs) face various taxes implemented to support the country, develop infrastructure, and promote certain goals. The following are the EV taxes in Nepal:

1. VAT

Value-added tax, or simply VAT, is a consumption-based tax. VATs are added to each stage of the production or distribution of items. These taxes apply to EVs and cars, along with all other goods and services, whether imported or locally produced. Some goods are exempt from VAT, while for the rest, including EV tax, Nepal has a single rate of 13%.

2. Registration Fee

EV owners must pay a one-time registration fee when registering their EVs with the Department of Transport Management. The cost of registration depends on the capacity and type of the EV.

3. Custom Duty

GoN imposes customs duty on every good imported into the country. It is designed to protect domestic industries or reduce the import of those items. Custom duty on EVs also depends on the type and capacity of the EV.

4. Excise Duty

Excise duties are the form of taxes levied on specific goods. Only a handful of goods are subject to excise duty as a tax, and the EV tax in Nepal is one of them. Sellers wrap excise duty into the price of the EV, so the end consumer or EV owner might not even know about it.

5. Road Development Fund or Road Tax

Unlike the above taxes, which are charged only once during the purchase, the road development fund fee is incurred annually. The tax goes by many names: road development fund, road tax, vehicle tax, car tax, or motorcycle tax. The Government of Nepal collects this tax to develop the road infrastructure and maintain & improve current roads in Nepal.

Growth of EV and Growing EV Tax in Nepal

Many changes have been made regarding the import and purchase of EVs in Nepal. The decisions of the Government of Nepal and the policies follow the commitment to zero net carbon emissions and COVID-19.

The following table reflects the changes in custom duty and excise duty for EVs in Nepal in the last 3 years, from fiscal year 2079 to 2080 B.S.

  2079/2080 2080/2081 2081/2082
EV Capacity Custom Duty Excise Duty Custom Duty Excise Duty Custom Duty Excise Duty
50 KW 10% 0% 10% 0% 15% 5%
50-100 KW 10% 0% 15% 10% 20% 15%
101-200 KW 30% 30% 20% 20% 30% 20%
201-300 KW 45% 45% 40% 45% 60% 35%
300KW above 60% 60% 60% 60% 80% 50%

Note: The Road Development Fund (RDF) and 13% VAT remain the same.

How EV Taxes Change the Electric Transition

  1. Reduced Sales and Adoption
  2. Impact on Specific Vehicle Segments
  3. Government Revenue vs. Long-Term Benefits
  4. Policy Inconsistency

Recent rises in electric vehicles have caused an uproar among many people. Some commenters believe such sudden tax increments will reduce EV sales and hinder the adoption of EVs in Nepal. Others, however, see the positive side of it. The optimistic crowd believes the revenue generated from the tax will be used to construct new charging stations and make long travel in EVs possible, further promoting the transition to electric.

Tax Incentives for Electric Vehicles

Nepal has actively promoted electric vehicles in the last few years. From 2022 to date, GoN, in partnership with various companies, has constructed over 50 EV stations, totaling almost 270 EV stations across Nepal.

Similar initiatives can be seen in government policies regarding taxes on electric vehicles. EV owners enjoy various tax benefits compared to ICE (internal combustion engine) vehicles.

  • Road tax exemption for 5 years
  • 50% rebate on road tax compared to ICE vehicles
  • Reduced customs duty and excise duty on EVs

Conclusion

Similarly to gasoline-fueled vehicles, many EV taxes in Nepal are levied on electric cars and bikes. Every EV tax fulfills some specific purpose. Customs duties help to control the excessive import of automobiles, while road taxes support road infrastructure development. Not all EV owners pay the same amount of EV tax, though. The tax on EVs in Nepal depends on the type and capacity of the EV. Two-wheelers and less powerful EVs are subject to less tax than four-wheelers and more powerful EVs.

All said, EV owners have various tax benefits from government policies. Even with the rise in EV taxes, EV vehicles still have lower tax rates compared to ICE vehicles, giving drivers enough incentive to switch to electric.