The Budget Speech for Fiscal Year 2083/84 has introduced several important reforms in tax administration, customs, VAT, investment promotion, and revenue system modernization. The major revenue-related policies and programs are summarized below:
Tax Rate and Income Tax Reforms
- The budget has introduced significant reforms in income tax to enhance equity and disposable income. The personal income tax exemption limit has been doubled to NPR 1 million. Similarly, the maximum rate of personal income tax has been reduced by 10 percentage points (i.e., to a maximum of 29%).
- In addition, capital gains tax on the sale of securities of listed companies has been made final, simplifying tax compliance. Likewise, capital gains tax has been exempted up to the government valuation in cases of land acquisition for development projects.
Customs and Excise Policy Reforms
- The customs system has been restructured to promote industrial growth and simplify tariff administration. Customs duty on 273 types of industrial raw materials has been reduced to at least one level lower than that on finished goods.
- The existing 11-tier customs tariff structure has been reduced to 7 tiers for simplification. Furthermore, excise duty on 360 items has been abolished.
- A new unified “Green Tax” has been introduced by integrating various scattered taxes, such as infrastructure development tax and road maintenance fees, collected at customs points.
Value Added Tax (VAT) Reforms
- To promote digital transactions, a 10% VAT discount has been introduced at the time of invoicing for purchases made through digital payment systems.
- The VAT refund system will be automated to ensure efficiency and transparency. Moreover, a high-level committee will be formed to study the feasibility of multiple VAT rates in the country.
Investment Promotion and Sectoral Incentives
- Various sector-specific incentives have been introduced to attract investment.
- In the IT sector, 50% tax exemption has been granted on income from the export of IT services, and employee “sweat equity” has been made tax-free.
- Agricultural processing industries will receive a full income tax exemption for the first 10 years of operation.
- Similarly, cinema halls established outside metropolitan and sub-metropolitan cities will enjoy full income tax exemption for 10 years.
- For electric vehicles (EVs), customs duties will now be based on value rather than peak power, and a clean infrastructure investment fee will be levied on batteries and charging stations.
Expansion of Tax Base and New Charges
- The budget has expanded the tax base by introducing new measures. VAT will be applicable on electricity consumption above 50 units per month at a concessional rate for end users.
- A domestic production promotion fee has been imposed on selected imported goods to protect local industries.
- In remote areas, a minimum “equity fee” will be charged for private education and health services.
- Additionally, excise duty on cigarettes, alcohol, and beer has been increased to discourage consumption and increase revenue.
Reform and Modernization of Revenue Administration
- Structural reforms have been introduced to modernize revenue administration. The Revenue Investigation Department will be abolished, and its functions will be transferred to relevant agencies.
- Mandatory e-billing will be enforced for all businesses with an annual turnover exceeding NPR 100 million through a central billing monitoring system.
- An AI-based e-assessment system will be developed to maintain a three-year tax audit cycle.
- The administration will be transformed into a paperless, faceless, and contactless system for efficiency and transparency.
- Furthermore, a dispute resolution scheme has been introduced, allowing taxpayers to withdraw pending court cases by paying 1% additional tax, with penalties and interest waived.
Overall,
The budget for Fiscal Year 2083/84 emphasizes tax simplification, digitalization, investment promotion, and broadening of the tax base. These reforms aim to enhance revenue mobilization, improve compliance, and support economic growth through a more efficient and modern tax administration system.
Also Read: 2.2 Concept & Principles of Revenue
राजस्व सम्बन्धी प्रमुख नीति तथा कार्यक्रमहरू (आ.व. २०८३/८४ को बजेट)
