Finance Ministry Clarification Fails to End EV Tax Debate

The government’s new tax framework for electric vehicles has quickly become one of the most closely watched issues following the announcement of Nepal’s budget for the upcoming fiscal year. While the Finance Ministry has issued a clarification on how the revised charges will apply, uncertainty remains over the wording of the law itself and the actual tax burden different vehicle categories will face.

At the centre of the debate is the treatment of electric vehicles priced between Rs 2 million and Rs 3 million. Questions raised by media reports, tax professionals and businesses prompted the secretariat of Finance Minister Dr. Swarnim Wagle to publicly explain that vehicles within that price bracket will be subject to a 20 percent Clean Infrastructure Investment Fee.

The budget has replaced the excise duty previously imposed on electric vehicles with the new fee. Unlike the earlier system, which relied on motor capacity, the revised structure calculates charges based on the vehicle’s value.

New Fee Structure

According to the clarification issued by the minister’s secretariat, electric vehicles will now be charged as follows:

• Up to Rs 2 million: 2.5 percent
• Rs 2 million to Rs 3 million: 20 percent
• Rs 3 million to Rs 4 million: 35 percent
• Rs 4 million to Rs 5 million: 70 percent
• Above Rs 5 million: 110 percent

The existing 20 percent customs duty, 5 percent road construction charge and 13 percent value added tax remain in place.

The revised structure signals the government’s intention to keep lower-cost electric vehicles relatively affordable while collecting higher revenue from premium models. Officials have linked the new fee to plans for expanding charging infrastructure, strengthening electricity transmission systems and supporting broader green infrastructure investment.

Dispute Over Legislative Wording

The controversy stems less from the policy objective and more from how the Economic Bill has been drafted.

The schedule attached to the bill first states that a 20 percent Clean Infrastructure Investment Fee applies to electric vehicles. Separate provisions then outline different rates for specific price categories. However, the Rs 2 million to Rs 3 million segment does not appear to have been explicitly assigned a separate rate in the same way as other brackets.

The ministry argues that where no alternative rate is specified, the general 20 percent rate automatically applies. Legal and taxation experts, however, have pointed to potential ambiguity in interpretation and implementation.

For businesses importing electric vehicles, the distinction is not merely technical. Tax treatment directly affects pricing decisions, inventory planning and consumer demand in a market that has expanded rapidly in recent years.

Fresh Questions After the Clarification

The government’s explanation has also generated another area of concern.

Some tax experts and industry representatives argue that the wording of the Economic Bill could be interpreted as imposing a total charge of 90 percent on vehicles priced between Rs 4 million and Rs 5 million. The clarification issued by the minister’s secretariat, however, refers to a 70 percent rate for that category.

That discrepancy has led to renewed calls for greater clarity before implementation begins. Businesses say the final impact on vehicle prices will become clear only after authorities formally apply the new framework and importers adjust their pricing.

The debate has moved beyond the technical details of taxation and into a broader discussion about legislative drafting and policy communication. Even after the ministry’s intervention, many in the sector say the language of the bill itself will need to leave little room for competing interpretations if further confusion is to be avoided.