VAT on electricity to yield Rs5.5 billion, inflation concerns intensify

Government defends new tax as essential for power infrastructure upgrades, but experts and critics warn it could increase household costs and dampen electricity demand.

The government has imposed a 5 percent Value Added Tax (VAT) on electricity, effective from the upcoming fiscal year, with officials estimating annual revenue of around Rs5.5 billion. Finance Minister Swarnim Wagle said the tax will apply to electricity consumption above 50 units and is intended to finance major infrastructure expansion in Nepal’s energy sector.