KATHMANDU: The budget for the upcoming fiscal year 2025/26 has several positive aspects for the automobile sector. Unlike previous years when automobile distributors would often be disappointed with the budget, they appear rather optimistic this year.
Finance Minister Bishnu Prasad Paudel presented the budget for the upcoming fiscal year in a joint session of the federal parliament on Thursday. The budget has instilled enthusiasm in the automobile industry by keeping the tax rates on electric vehicles (EVs) unchanged and introducing various facilities.
The budget has more than what the automobile industry was expecting. Prior to the budget, the industry had anticipated an increase in EV taxes as rumors were doing the rounds that such taxes would be revised upwards. These rumors prompted automobile distributors to import over 5,500 units of EVs by investing more than Rs 15 billion over the past one and a half months.
However, the budget kept the tax rates unchanged, leaving some traders stunned. Those who hurriedly imported EVs in anticipation of a tax hike, expecting to sell them at higher prices for profit, now regret their haste. Given the average monthly sale of around 1,000 EV units, the EVs imported since mid-April (Baishakh) are unlikely to sell out within six months. Distributors now face unnecessary financial burdens, including ongoing bank interest payments until the excess stock is sold.
On the other hand, distributors who imported fewer EVs before the budget have benefited more. With global EV prices declining, they can now procure vehicles at lower costs compared to pre-budget prices and avoid the unnecessary interest expenses faced by those with large stockpiles.
The budget promotes green energy by keeping EV tax rates unchanged and providing incentives for assembling industries, importing parts, charging stations and green hydrogen production.
MeroAuto has compiled five incentives and facilities provided to the automobile sector through the budget:
Green Hydrogen Production
Machinery and equipment imported for green hydrogen production are exempt from all customs duties and taxes. Additionally, green hydrogen producers have been granted a five-year income tax exemption.
EV Charging Machine Assembly
Equipment imported for establishing industries that produce or assemble EV charging machines will incur only a 1% customs duty. Such sectors have also been granted a five-year income tax exemption.
Scrappage of Old Vehicles
The government has introduced a policy that allows owners of public and private vehicles over 20 years old or no longer operational to deregister their vehicles by paying only income tax for the last two years. They are exempt from other taxes for deregistration purposes.
Transport Service Providers
Businesses providing transport services can deduct advance tax from payments made to individual vehicle operators for rentals. The rental amount can be deducted as an expense when calculating taxable income.
No Local Taxes for Temporary Imports
Vehicles, transport equipment and heavy machinery temporarily imported by paying applicable fees at customs points won’t have to pay other taxes and fees to provincial and local governments.
