The Government of Nepal will begin collecting 5% Value Added Tax (VAT) and 1% Tax Deducted at Source (TDS) on every ride-sharing transaction starting Shrawan 1, 2083, as part of the new fiscal year's tax measures. The Inland Revenue Department (IRD) has completed the necessary preparations to implement the new tax system, which was introduced through the FY 2083/84 national budget.
Under the new arrangement, a total of 6% of each transaction will be collected as government revenue. The 5% VAT will ultimately be borne by passengers as the end consumers, while the 1% TDS will be deducted in the driver's name. According to IRD Director Shiva Sharma, ride-sharing drivers must be registered with a Personal Permanent Account Number (PAN) for TDS purposes, although they are not required to register for VAT individually.
Ride-sharing platforms such as Pathao and other service providers will be responsible for collecting the applicable tax from drivers and depositing it with the tax office by the 25th day of every month. For example, if a passenger pays Rs. 100 for a ride, Rs. 5 will be collected as VAT and Rs. 1 as TDS, excluding the platform's commission. The company will then remit the collected tax to the government on behalf of the driver.
Nepal's ride-sharing industry is currently estimated to generate more than Rs. 20 billion in annual transactions, and the government expects the new tax policy to generate approximately Rs. 1.20 billion in annual revenue. The tax is also expected to increase ride fares. According to Pathao Nepal Managing Director Yashu Thakali, taxi fares are expected to rise by around 5%, while the company is still assessing the impact on motorcycle ride fares. Pathao has also urged its drivers to update their PAN registration details to comply with the new tax requirements.
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