Controversy Over VAT Added to June Electricity Bills Despite Government’s July Implementation

Nepal Electricity Authority has started applying a 5 percent Value Added Tax (VAT) on electricity bills for consumers using more than 50 units from mid-July. However, VAT charges were included in electricity bills for consumption in June, sparking public outcry over how VAT meant to start in July was applied retroactively to the previous month. The authority defends its position by stating that VAT applies based on the bill issuance date, not the consumption period; hence, all bills issued after July 1 fall under the VAT system.

According to the fiscal year’s budget provisions, VAT was scheduled to be implemented from July 17, applying a 5 percent charge on electricity bills exceeding 50 units. Finance Minister Dr. Swarnim Wagle had announced this directive. Despite this, it has been found that the Nepal Electricity Authority began collecting VAT on electricity revenue starting June. Even if June’s electricity consumption bills are paid in July, they have been issued with VAT included.

The imposition of VAT on electricity consumption from June billed in July has triggered widespread protests. Many consumers have shared evidence on social media highlighting VAT charges on their June consumption bills. A senior official from the authority explained that all bills issued after July 1 are subject to VAT regardless of the consumption period mentioned in the bill. Therefore, VAT must be applied as per the issuance date rather than the consumption date.

While the authority maintains that all bills issued after July 1 fall under the VAT system using the bill issuance date as the basis, the Revenue Department has stated that official verification depends on reviewing the relevant bill and meter reading data. The issue reveals some ambiguity between the electricity authority and tax administration concerning the imposition of VAT on June consumption starting from July.