IRD Clarifies No VAT on Electricity Bill of Final Month of FY 2025/26

KATHMANDU; The Inland Revenue Department (IRD) has clarified that value-added tax (VAT) will not be charged on electricity consumed during the final month of Fiscal Year (FY) 2025/26, covering the period from mid-June to mid-July.

In a public notice issued on Monday, the tax authority sought to clear confusion surrounding the implementation of VAT on electricity services consumed during the last month of the previous fiscal year.

The clarification follows amendments introduced through the Finance Act 2026, which revised the Value Added Tax Act, 1996. Under the new provisions, household consumers will be charged 5 percent VAT, while industrial consumers will pay 13 percent VAT on electricity consumption. However, the IRD stated that these rates will apply only to electricity consumed from the first day of the new fiscal year onward.

The department also confirmed that VAT will be levied on the minimum fee, or demand charge, for electricity consumption from mid-July this year.

The issue gained attention after the Nepal Electricity Authority (NEA) issued electricity bills that included VAT for the final month of FY 2025/26. In response, the NEA sought clarification from the IRD on whether the tax should apply to bills issued after the start of the new fiscal year.

The Finance Act has introduced a provision to impose VAT on household electricity consumption exceeding 50 units from the current fiscal year.