Exploring the New Budget 2081/82: Higher Taxes for Electric Vehicles

-Nilima Maharjan

Ms. Maharjan ​​is a research fellow at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. Author can be reached at Nilima Maharjan [email protected].

Electric vehicles are more attractive to consumers than conventional vehicles in Nepal due to lower taxes on them. Despite facing disadvantages like inadequate road infrastructure coupled with few charging stations, data shows that consumption of electric vehicles is on the rise, but the recent budget of 2081/82 may impact it significantly as a result of  increased taxes on electric vehicles.  The government raised the customs and excise duties on electric vehicles for the upcoming year based on the motor capacity of the vehicles as shown below:

Motor Capacity Customs Duty-2080/81 Customs Duty-2081/82 Excise Duty- 2080/81 Excise Duty-2081/82
0 – 50kW 10% 15% 0% 5%
51kW – 100kW 15% 20% 10% 15%
101kW – 200kW 20% 30% 20% 20%
201kW – 300kW 40% 60% 45% 35%
301kW and Above 60% 80% 60% 50%

This move by the government will distort the incentives provided to adopt EVs, leading to delaying the shift to cleaner energy sources. 

By the looks of it, it can be said that EV taxes are being taken as a solution to generate revenue for the resource crunched government. The government suggests using the taxes for developing the ecosystem necessary for facilitating transition to EVs further imposing a green tax on petroleum products which is Rs 1/liter, and coal which is 0.5/KG with a goal of reducing carbon emissions disincentivizing the public to use it. 

But who would be burdened by such policies? It is us, the general public. 

Those interested in buying an EV, will refrain because of the increase in prices, a result of increased taxes, and those using the combustion engine will be forced to pay an additional Rs. 1 green tax along with the other taxes imposed on petroleum products. 

This shows the lack of clarity in the government’s commitment of achieving net-zero by 2045. The government’s commitment of making the environment better by reducing carbon emissions will face challenges because of the delayed shift to EVs from the combustion vehicles.

Nepal’s government should take a holistic approach while implementing policies if it aims to meet its ambitious commitments. It is of utmost importance that fiscal decisions and commitments made must be in sync, as policy changes impact consumers’ choices ultimately affecting the government’s long term goals.