As the world steadily moves towards greener alternatives, electric vehicles (EVs) have been heralded as a key component in reducing carbon emissions and combating climate change. However, in a surprising move, the Nepal government has decided to increase electric vehicle taxes in the new fiscal year 2081/82 budget. In the budget announcement yesterday, Finance Minister Barshaman Pun revealed that customs and excise duties will now be determined by the motor capacity of vehicles, resulting in higher taxes for several categories.

The new budget stipulates a substantial hike in the excise duty and value-added tax (VAT) on electric vehicles. Additional import duties have been imposed, varying based on the vehicle's price and battery capacity. The customs and excise duties for electric cars with motor capacities ranging from 51 kW to 100 kW have been raised by 5%. Specifically, the customs duty has been elevated from 15% to 20%, while the excise duty has increased from 10% to 15%.

The customs duty for electric cars with a motor capacity ranging from 101 kW to 200 kW has been increased from 20% to 30%, while the excise duty remains steady at 20%. Likewise, for electric vehicles equipped with a motor capacity ranging from 201 kW to 300 kW, there has been a 20 percent rise in customs duty, escalating from 40% to 60%. Conversely, the excise duty for this particular category has undergone a 10 percent decrease, diminishing from 45% to 35%.

The customs duty for electric vehicles with a motor capacity exceeding 301 kW has been raised from 60% to 80%, whereas the excise duty has been decreased from 60% to 50%. There is a risk that it could dampen consumer demand for EVs, slowing down the pace of adoption and innovation in the electric vehicle market.  It remains to be seen how the market will adapt to these changes and what additional measures the government might implement to support both economic and environmental objectives. 

The recent decision to hike taxes on electric vehicles in the new budget remains a topic that requires careful consideration. Public sentiment suggests widespread dissatisfaction, especially given Nepal's current road conditions and the lack of adequate charging infrastructure. Many hope that the Nepalese government will prioritize electric vehicles more significantly following the introduction of these taxes.

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