KATHMANDU, May 14: The government provided tax exemptions worth Rs 80 billion to industrialists and entrepreneurs in Fiscal Year (FY) 2023/24.
According to the 62nd annual report released by the Office of the Auditor General on Wednesday, the government granted a total of Rs 79.873 billion in exemptions during FY 2023/24.
The report states that while tax exemptions were also provided under the Finance Act for internal revenue, the relevant ministry and the Inland Revenue Department have not maintained proper records of these exemptions.
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As per details from the Ministry of Finance (MoF), exemptions under the South Asian Free Trade Area (SAFTA) facility included Rs 4.87 billion in customs duties and value-added tax (VAT) on imported goods.
Similarly, the MoF reported that by mid-March 2024, various ministries, departments, local governments, and institutions imported goods worth Rs 34.2752 billion, receiving customs duty exemptions totaling Rs 6.6099 billion. Over the past four years, revenue exemptions amounted to Rs 20.6269 billion.
Under Section 18(3) of the Finance Act, customs duty exemptions were granted for goods worth Rs 43.5648 billion, as per project development agreements for foreign loan or grant-funded projects, with exemptions totaling Rs 7.5298 billion.
The report notes, “The MoF has not maintained updated records of goods and amounts exempted under this facility.”
It recommends that exemptions should only be granted after the master list is approved before project tendering. Additionally, it suggests monitoring whether exempted imports are used for intended projects and analyzing the impact of growing tax exemptions.
Section 18 of the Finance Act, 2080, allows the Government of Nepal to adjust or fully/partially exempt duties, fees, or taxes under existing laws. Similarly, Sections 14 and 15 of Schedule 1 permit full or partial customs duty exemptions.
