May 22, 2024, Wednesday
Nepal 1:37:26 pm

Tax increased in import of small EVs

Business community stunned

The Nepal Weekly
June 6, 2023

The budget of the coming FY is not supportive to the nation’s commitments expressed in the global climate forums such as COP 26, Nationally Determined Contributions, Sustainable Development Goals, Periodic National Development Plans, Energy White Paper and so on.

The Finance Minister of the Government of Nepalannounced the budget for the Fiscal Year 2080-81 (2023-24) recently. There are many changes in the revenue and expenditure structures in the budget in comparison the budget of the current Fiscal Year which will remain effective till 15th July.  Moreover, the budget for the coming FY has increased customs duties on small electric vehicles .So as the customs and excise duty up to 15 per cent on small electric cars, jeeps and vans, which are in high demand and are in use in Nepal have been increased. However, custom and excise duty on mid-range electric vehicles has been reduced while it custom and excise duty on expensive category EVs.

The business community engaged in import and sales of electric vehicles say that this act is opposite to the government’s policy of increasing electricity consumption and moving towards zero carbon emissions by promoting electric mobility in the country.

More to explain on the new custom and excise duties, as per the announcement, the government has increased customs and excise tax on EVs with motor power between 50 to 100 kilowatts by 5 and 10 per cent respectively. Thus, electric vehicles in that category now have to pay 15 per cent customs tax and 10 per cent excise duty. Previously, these vehicles did not have to pay excise duty.

Similarly, the business organisations estimate that electric with 51 to 100 kW will be costlier by 20 to 22 per cent as a result.

However, tax on EVs with motor power between 100 to 200 kilowatts made cheaper. The customs and excise duty on this category has brought down by 20 per cent. Earlier, both customs and excise duty were set at 30 per cent on each heading.

This is also to note that the government has maintained a 40 per cent customs duty on vehicles with motor power of 200 to 300 kilowatts. Earlier, it was 45 per cent. Excise duty remains unchanged at 45 per cent on electric vehicles of this category.

The customs rate for vehicles with a capacity of more than 300 kilowatts has been maintained at 60 to 80 per cent. Earlier, the rate was set at 60 per cent. Excise duty is 60 per cent in this range.

More to surprise, the Government did not speak anything good and supportive to promotion of EVs for public transport. On the contrary, electric vans with 11 seat and 14 seat capacity are made taxable at the rate of 10 per cent and 10 per cent as custom duty and excise duty respectively. This was 1 per cent and 10 per cent respectively in the current FY. The business community and climate activists who put voice on need of priority on rapid promotion of electric vehicles for public transportation are almost silent in this issue.

As a matter of fact, the Government should be able to make EVs for public transportation cheaper to attract private sector to invest in electric bus services in the country. The Government need to formulate policies to support private sector technically and financially. The Government also should be capable to well utilise Pollution Control Tax, the fund collected form each litre of petrol and diesel consumed. The fund has not been spent any money but swelled to a sum of 21 billion rupees or more so far.

The active stakeholders such as government agencies, EV importers could not bring this aspect to front. But, most of them are focused to the expose the pains created by new tax rule on EVs used by individuals and institutions that is ready to implement.

Thus, in conclusion, the budget of the coming FY is not supportive to the nation’s commitments expressed in the global climate forums such as COP 26, Nationally Determined Contributions, Sustainable Development Goals, Periodic National Plans, Energy White Paper and so on.

Keeping in view the impacts of budget structures and the destination it is moving towards, media and business organisations are saying that the move is opposite to the commitments and losing opportunities to consume electricity generated in the country, reduce import of fossil fuels to support narrow the gap in the balance of payment and so on.