KATHMANDU: The government is considering raising the electricity consumption threshold exempt from the 5% value-added tax (VAT) from 50 units to 150 units, a move aimed at lowering household electricity costs despite an estimated annual revenue loss of more than Rs 2 billion.
Officials from the Ministries of Energy and Finance are holding preliminary discussions on the proposal, which follows public criticism over the new VAT imposed on electricity consumption above 50 units under the 2026/27 budget.
Anshukiran Shahi, a member of the Electricity Tariff Review Committee, said lower electricity costs would encourage greater consumption and ultimately benefit the broader economy.
According to government estimates, increasing the VAT-free threshold to 150 units would reduce annual VAT revenue from Rs 12.43 billion to Rs 10.22 billion, resulting in a revenue loss of about Rs 2.02 billion.
The change would also significantly expand the number of households exempt from VAT. Of Nepal’s 5.31 million domestic electricity consumers, around 4.69 million would no longer pay the 5% VAT if the exemption is extended to 150 units, leaving only about 616,000 households subject to the tax.
The proposal remains under review, and no final decision has been announced.
