Energy Ministry Pushes to Raise VAT-Free Electricity Limit to 150 Units

The Ministry of Energy, Water Resources and Irrigation is preparing to raise the VAT exemption threshold on household electricity consumption from the current 50 units to 150 units in an effort to reduce public dissatisfaction over the recently imposed 5% Value Added Tax (VAT). The proposal, initiated by Energy Minister Biraj Bhakta Shrestha, aims to encourage greater domestic electricity consumption and reduce dependence on LPG. If approved, the number of households required to pay VAT would drop from 1.854 million to around 616,000, meaning nearly 88% of Nepal’s 5.3 million domestic consumers would be exempt. According to the Nepal Electricity Authority (NEA), the move would reduce annual VAT revenue by approximately Rs. 2.2 billion, but the government believes the long-term benefits of increased electricity use and improved energy efficiency would outweigh the revenue loss. The proposal has already been forwarded to the Ministry of Finance for consideration.