The government has initiated preparations for policy reforms by significantly reducing the number of items currently subject to excise duty. Finance Minister Dr. Swarnim Wagle has begun groundwork to eliminate excise duties on daily consumer goods and domestically produced items. Plans are moving forward to realign excise duties, currently imposed on approximately 1,200 items, with customs tariff regulations in accordance with World Trade Organization rules. 14 Jestha, Kathmandu.
The government is preparing comprehensive reforms on excise duty policies and the applicable goods list. Internationally, excise duties are customarily levied only on products that harm human health or those the state aims to discourage consumption of. Traditionally, excise duties have been applied primarily on tobacco and alcohol production. In Nepal’s context, excise duty has been in place for a long time. The Excise Duty Act of 2058 BS (2001 AD) primarily mandated excise on health-hazardous items such as alcohol, tobacco, environmentally harmful products (e.g., plastics, petroleum), and luxury goods and services (e.g., vehicles, soft drinks).
However, over the past approximately 25 years, the list of goods subject to excise duty has expanded to about 1,200 items. Contrary to the established rule of imposing excise only on items listed in the negative list, duties have also been levied on food grains, livestock products, spices, construction materials, electronics, and others. Sources from the Ministry of Finance have indicated that Finance Minister Dr. Wagle aims to drastically reduce the list of such arbitrarily excise-taxed goods.
“Imposing excise duty on daily consumer goods, imported vegetables and fruits, as well as goods produced by local industries, was an incorrect practice,” a ministry source stated. Discussions are underway to substantially reduce the list of goods added in different phases and to remove the discrimination between import and local production regarding excise duty application. Currently, excise duties are treated similarly to customs tariffs; this time, the plan is to correct this approach.
“As a member of the World Trade Organization (WTO), our country is not permitted to impose customs duties exceeding 40 percent. For this reason, excise duties were often applied under the guise of customs tariff rates,” the source explained. “Now, there is a plan to abolish excise duties and raise the tariff rate ceiling to below 40 percent.”
