Government Signals Duty Review As Industries Push For Fairer Raw Material Tax

KATHMANDU, July 29 — The government has signaled that it is ready to review Nepal’s tax and customs structure after industrialists complained that the current system still makes domestic production difficult, especially when raw materials and finished goods are taxed in ways that weaken local manufacturers.

According to reports, Finance Minister Dr. Swarnim Wagle gave the assurance during a discussion with business and industry representatives at the Ministry of Finance on Tuesday. According to former FNCCI president Chandra Dhakal, industrialists raised concerns over tax rates, import duties, infrastructure problems, banking issues and the lack of effective support for domestic production.

Industries Want A Fairer Tax Gap

The main concern from industrialists is simple: raw materials used by factories should be taxed lower than finished imported goods.

When the duty gap is not clear enough, Nepali manufacturers face higher production costs while finished goods from abroad compete in the local market. This can discourage factories, reduce investment and make it harder for local products to survive against imports.

Wagle told the private sector that the government was positive about correcting tax rates on raw materials and finished goods and reducing import duties where required. He also assured that issues possible to solve through Cabinet-level or ministry-level decisions would be taken forward.

Reform Has Already Started Through The Budget

The latest assurance comes after the government had already announced some tariff changes through the budget for fiscal year 2083/84.

While presenting the budget, Finance Minister Wagle said customs duty on 273 types of industrial raw materials had been reduced to at least one level lower than the duty on finished goods. The government also announced the removal of excise duty on 360 items.

This means the current discussion is not only about a new promise. It is part of a broader policy push to make production inside Nepal cheaper and more competitive.

42 Economy-Related Laws Under Review

Wagle also told industrialists that the government has started the process of amending or repealing 42 economy-related laws this year to reduce administrative hurdles and improve the investment environment.

Separate reports show that the government has already registered a finance-related bill in Parliament to repeal some outdated laws and amend others, including changes linked to the VAT Act, Income Tax Act and Customs Act. The stated aim is to remove legal duplication, modernize revenue administration, reduce procedural barriers and make public services more efficient.

Banking Problems Also Raised

The meeting also covered problems related to bank loans and working capital rules.

Industrialists told the Finance Ministry that credit-related issues have added pressure on businesses at a time when many are already struggling with weak demand and high operating costs. A deputy governor of Nepal Rastra Bank was also present during the discussion.

According to Onlinekhabar, the Finance Ministry, Industry Ministry and Nepal Rastra Bank committed to working together to address loan and working capital-related problems faced by industrialists.

Why The Tax Structure Matters

Import taxes directly affect how competitive Nepali factories can be. Imported goods are generally subject to customs duty and 13 percent VAT, with VAT calculated on the CIF value plus customs duty. Tariff changes are usually announced through the annual budget and later ratified by Parliament.

For industries, even a small difference in duty can change production costs. If raw materials remain expensive, factories lose their price advantage. If finished imports become cheaper than local production, businesses may choose trading over manufacturing.

That is why the private sector has repeatedly demanded a tax system that encourages factories, not just imports.

Government Under Pressure To Deliver

Industrialists also asked the government to implement policies that prioritize domestic production more effectively. They argued that Nepali goods are facing tough competition from imported products and that policy support is needed for import-substituting industries.

Wagle said investment promotion, support for import-substitution industries and policy reform in infrastructure-related sectors remain government priorities.

The assurance has raised expectations, but the real test will be implementation. Industrialists are now watching whether the government will turn its commitments into clear tariff adjustments, faster administrative decisions and easier access to finance.

For Nepal’s manufacturing sector, the issue is bigger than tax rates alone. It is about whether the country wants to make local production easier, create jobs and reduce dependence on imported finished goods.