The Inland Revenue Department (IRD) has clarified that the newly introduced Value Added Tax (VAT) on electricity consumption will apply only to electricity used from Shrawan 1, 2083, resolving confusion among consumers and businesses regarding the implementation of the new tax provision. The clarification follows the amendment to the Value Added Tax Act, 2052 through the Economic Act, 2083.

According to the department, electricity supplied to final consumers from Shrawan 1 onward will be subject to 5% VAT, while electricity supplied to businesses and other eligible consumers will attract 13% VAT. The IRD emphasized that electricity consumed up to Ashadh 32, 2083 will remain VAT-exempt, even if the bill is issued after Shrawan 1, because electricity was still categorized as an essential VAT-exempt service during that period.

The department also clarified that the tax is based on the actual period of electricity consumption, not the billing date. This means any electricity used before the new provision came into effect will not be taxed, while all electricity consumed from Shrawan 1 onward will be subject to VAT regardless of when the bill is generated.

Additionally, the IRD stated that minimum charges and demand charges included in the Nepal Electricity Authority's approved tariff structure are considered part of the electricity service and will also attract VAT for electricity consumed from Shrawan 1 onward. The department said the notice was issued to eliminate public confusion and urged consumers and businesses to comply with the revised tax provisions introduced under the Economic Act, 2083.

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