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The Nepal Electricity Authority (NEA) has begun imposing a 5 percent Value Added Tax (VAT) on electricity bills of household consumers using more than 50 units of power per month from today (Friday).

The NEA said it has updated its billing system to implement the new provision.

Under the government’s decision, electricity consumption up to the first 50 units remains exempt from VAT. The 5 percent VAT applies only to the electricity charges for consumption beyond that threshold.

Households consuming 50 units or less each month will not pay any additional VAT. However, customers using 51 units or more will have to pay the extra tax.

According to the NEA, more than three million customers consume up to 50 units of electricity a month and will remain unaffected. Around 1.2 million households consuming between 51 and 150 units, and another 250,000 households using between 151 and 250 units, will be affected by the new tax.

The measure is expected to increase electricity bills for households using appliances such as water pumps, geysers, heaters, induction cooktops and infrared stoves, as well as those charging electric vehicles at home.

For example, a household with a 5-ampere meter consuming 100 units of electricity per month currently pays Rs 835. Under the new system, a 5 percent VAT will be added to the charges for units consumed beyond the first 50, increasing the monthly bill by Rs 23.75 to Rs 858.75.

Energy experts have expressed concern that the additional tax could discourage the use of electricity at a time when the government has been promoting electrification for cooking, water pumping and transport.

Finance Minister Dr Swarnim Wagle, however, said the first 50 units remain VAT-free and that the tax does not apply to the entire electricity bill. He added that for most households consuming up to 300 units a month, the effective VAT rate would remain below 5 percent.

Republica