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The Inland Revenue Department (IRD) has clarified that the value-added tax (VAT) is not charged on the electricity bill for the last month, during mid-June and mid-July.

Issuing a public notice on Monday, the tax authority has come up with its effort to clarify the confusion the VAT imposition levied on electricity services consumed during the last month of the Fiscal Year (FY) 2025/26.

The Finance Act 2026 has amended the Value-Added Tax Act, 1996, allowing the government authorities to impose 5 percent VAT on the end household consumers and 13 percent VAT on industrial consumers. With the provision, the VAT will be charged on electricity consumption bills from the first date of the new FY.

The IRD has further stated that VAT will also be levied on the minimum fee or demand charge for electricity consumption from mid-July this year.

The controversy arose after Nepal Electricity Authority (NEA) issued the bill adding VAT amount to its customers for the last month. Subsequently, the NEA wrote to the IRD a few days ago, seeking the review of the matter.

The NEA, in line with the government provision to register itself in VAT, had requested the IRD to clarify whether VAT will be levied on electricity charges issued since the commencement of new FY. The Finance Act has made provision for levying VAT on electricity charges above 50 units for the current FY.