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The Nepal Electricity Authority (NEA) has clarified that electricity consumed up to the end of the month of Asar will not be subject to Value Added Tax (VAT).

The clarification follows guidance from the Inland Revenue Department and the Large Taxpayers Office, which confirmed that VAT does not apply to electricity consumed on or before the end of Asar, even if the bill was issued in the following month.

The NEA said that customers who have already paid VAT on such bills will not lose the amount.

Instead, the VAT collected will be treated as an advance payment and automatically adjusted in their Bhadra electricity bill.

The confusion arose because electricity consumed in Asar is billed in Shrawan, coinciding with the implementation of the Economic Act 2083, which introduced VAT on electricity.

Seeking clarity, the NEA formally wrote to the tax authorities on Shrawan 8.

On Monday, the Inland Revenue Department confirmed that VAT would not apply to electricity consumed up to the end of Asar, but would apply to electricity consumed from Shrawan 1 onward, including minimum or demand charges.

Under Nepal’s VAT law, household consumers will pay a 5% VAT, while other consumers will be subject to a 13% VAT.

The issue sparked public concern after the NEA initially included VAT in bills covering electricity consumed before the new tax took effect.

Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha intervened and pushed for a resolution, leading to the latest clarification.