The Government of Nepal has introduced major changes to the tax structure of electric vehicles (EVs) through the fiscal year 2083/84 budget, presented by Finance Minister Dr. Swarnim Wagle.

Under the new arrangement, the earlier system of taxation based on motor capacity and seating configuration has been replaced with a more standardized structure combining customs duty, infrastructure development tax, road construction fee, and VAT.

According to the new policy, all electric vehicles will now be subject to a flat 20 percent customs duty, along with a 13 percent value added tax (VAT), which remains unchanged.

In addition, a 5 percent road construction fee will be applied to all electric vehicles. A new “clean infrastructure investment fee” has also been introduced, replacing the previous motor-based excise duty system.

The infrastructure fee varies depending on the customs value of the vehicle. EVs priced below Rs. 2 million will attract a lower rate of 2.5 percent, while vehicles in higher price brackets face progressively higher rates, reaching up to 130 percent for premium segments above Rs. 5 million.

When combined, the total tax burden on electric vehicles now varies significantly by price segment. For example, total effective taxation is estimated at around 45.94 percent for vehicles under Rs. 2 million, and can rise above 200 percent for high-end EVs once all layers of tax are applied.

The government has also restructured taxation for passenger vehicles such as minibuses and microbuses, moving away from the previous seating-based system that allowed different rates for 11–14 seat and 15–25 seat categories.

Under the revised system, vehicles with 11 to 25 seats will now fall under a unified tax bracket. Electric buses in this category will be subject to a 10 percent tax structure, while larger buses above 25 seats will face a 5 percent excise duty.

Officials say the restructuring aims to reduce tax evasion, eliminate classification manipulation, and create a more transparent and uniform taxation system in the automobile sector.

The government has also provided certain concessions, including a 1 percent customs exemption for large electric buses above 25 seats and a 2.5 percent infrastructure fee on all electric three-wheelers.