The government of Nepal is advancing regulations to manage tax exemptions for deep-cycle lead-acid and lithium-ion batteries used in electric vehicles and clean tempos. The Ministry of Forests and Environment has released two draft procedures for public feedback, aiming to enhance transparency and ensure genuine consumer benefit.
These drafts, titled the "Procedure to be followed while deciding on recommendations for zero-rated VAT on deep-cycle lead-acid batteries, 2083" and the "Procedure to be followed while deciding on recommendations for customs duty exemption on deep-cycle lead-acid and lithium-ion batteries, 2083," are designed to make the recommendation process through the Department of Environment more systematic. The drafts were prepared under the authority of the Good Governance Act, 2064.
Under the proposed rules, manufacturers must submit detailed documentation to get tax exemptions. This includes industry registration, tax clearance certificates, and specific technical data like HS codes and battery quantities. The government plans to implement a tracking system requiring records of the end consumer's name, address, phone number, citizenship number, and the registration number of the vehicle where the battery is installed. This aims to ensure that only genuine vehicle owners and end consumers benefit from the exemptions.
The first procedure targets domestic battery production with zero-rated VAT for locally produced deep-cycle lead-acid batteries. This initiative is intended to encourage local industry and reduce foreign currency outflow. Only batteries certified for use in electric vehicles will qualify for this benefit. Manufacturers must apply with comprehensive documentation, including technical specifications and cost details.
The second procedure involves customs duty exemptions for imported batteries used in clean tempos, particularly those operating within the Kathmandu Valley. This includes both deep-cycle lead-acid and lithium-ion batteries. Lithium-ion batteries are three times lighter, charge faster, and last 5-8 years compared to lead-acid batteries. This could significantly enhance the efficiency and profitability of clean tempo operations.
Many clean tempo operators are women and low-income earners, and the high cost of battery replacement has been a significant barrier. The proposed exemptions are expected to make these operations more sustainable and financially viable.
Stakeholders have one week to provide suggestions on these drafts.
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