Chapter 10 · Part 10 — Customs Duty
Customs Duty
Seven tiers, the green tax, and a value-based rethink of electric vehicle taxation.
10 of 14 · 11 min
Nepal is an import-dependent economy, so customs is where a large share of revenue is actually collected — and where industrial policy is actually made. This Part covers the tier simplification, the new value-based EV regime, and the exemptions.
The structural reform: 11 tiers to 7
╔═══════════════════════════════════════════════════════════════════╗ ║ THE CUSTOMS DUTY STRUCTURE IS STREAMLINED FROM 11 TIERS TO 7. ║ ╚═══════════════════════════════════════════════════════════════════╝
Why fewer tiers is a genuine reform, not cosmetics.
┌──────────────────────────────────────────────────────────────────────┐ │ MORE TIERS → more classification boundaries │ │ → more disputes about which side a good falls on │ │ → more discretion at the border │ │ → more scope for misclassification, deliberate or not │ │ │ │ FEWER TIERS → fewer boundaries, fewer arguments, faster │ │ clearance, less discretion │ └──────────────────────────────────────────────────────────────────────┘
The cascading principle
╔═══════════════════════════════════════════════════════════════════╗
║ Customs duty on 273 INDUSTRIAL RAW MATERIALS is reduced, so ║
║ they remain AT LEAST ONE SLAB BELOW FINISHED GOODS. ║
╚═══════════════════════════════════════════════════════════════════╝
THE LOGIC — "effective protection"
┌──────────────────────────────────────────────────────────────────┐
│ If raw materials and finished goods bear the SAME duty: │
│ │
│ Import the finished good → pay duty once │
│ Import raw material, make it here → pay the same duty │
│ on inputs, then add local costs │
│ │
│ ⇒ Domestic manufacture is DISADVANTAGED. │
├──────────────────────────────────────────────────────────────────┤
│ If raw materials sit at least one slab BELOW: │
│ │
│ ⇒ Local value addition is protected, and manufacturing │
│ in Nepal becomes viable. │
└──────────────────────────────────────────────────────────────────┘
ILLUSTRATIVE
Finished good 20% duty
Raw material 10% duty ← one slab below
⇒ The 10-point gap is the effective protection given to
whoever does the manufacturing inside Nepal.The green tax and consolidated charges
Several customs-point charges are CONSOLIDATED into a GREEN TAX: • infrastructure tax • road maintenance fee • other customs-point charges PLUS a 10% GREEN TAX on imported PETROL and DIESEL, notwithstanding anything elsewhere in the Act. AND customs duty on • petrol (2710.12.10) • kerosene (2710.19.10) • high-speed diesel (2710.19.30) is REDUCED BY 50%.
A new charge on imports:
CLEAN INFRASTRUCTURE INVESTMENT FEE (CIIF) Levied on imports, to fund local production, charging stations and battery systems.
The electric vehicle rethink
The most significant single change: the basis of EV taxation moved from motor output capacity to purchase value.
┌──────────────────────────────────────────────────────────────────────┐ │ BEFORE NOW │ │ ────── ─── │ │ Based on MOTOR OUTPUT Based on PURCHASE VALUE │ │ CAPACITY (kW) (CIF) — a VALUE-BASED system │ └──────────────────────────────────────────────────────────────────────┘
Why the change. A capacity basis taxes engineering, not affordability — two vehicles with the same motor output can differ enormously in price. A value basis is straightforwardly progressive: expensive vehicles pay more.
The EV schedule
┌──────────────────┬──────────────┬────────────────────────────────────┐ │ CIF VALUE │ CUSTOMS DUTY │ CIIF (levied AFTER customs duty) │ ├──────────────────┼──────────────┼────────────────────────────────────┤ │ Up to Rs 20 lakh│ 20% │ 2.50% │ │ Rs 20–30 lakh │ 20% │ 20% │ │ Rs 30–40 lakh │ 20% │ 20% + additional 15% │ │ Rs 40–50 lakh │ 20% │ 20% + additional 70% │ │ Above Rs 50 lakh│ 20% │ 20% + additional 110% │ └──────────────────┴──────────────┴────────────────────────────────────┘ ! CUSTOMS DUTY IS FLAT AT 20% ACROSS EVERY BAND. ALL the progressivity is in the CIIF.
Worked illustration.
Two imported EVs.
VEHICLE A — CIF Rs 1,800,000 (under Rs 20 lakh)
Customs duty 1,800,000 × 20% = Rs 360,000
Base after CD = Rs 2,160,000
CIIF at 2.50% = Rs 54,000
────────────
Duty + CIIF = Rs 414,000
As % of CIF = 23.0%
VEHICLE B — CIF Rs 6,000,000 (above Rs 50 lakh)
Customs duty 6,000,000 × 20% = Rs 1,200,000
Base after CD = Rs 7,200,000
CIIF at 20% + additional 110% = 130% = Rs 9,360,000
────────────
Duty + CIIF = Rs 10,560,000
As % of CIF = 176.0%
╔═══════════════════════════════════════════════════════════════╗
║ A vehicle 3.3× the CIF value bears 25.5× the charge. ║
║ The CIIF band structure is steeply progressive. ║
╚═══════════════════════════════════════════════════════════════╝
! ILLUSTRATIVE ONLY. The exact base on which CIIF is computed,
and any further taxes (VAT, road charges), must be confirmed
against the tariff and the Finance Act. [R] The point here is the
SHAPE of the schedule, not a landed-cost calculation.And a reduction at the bottom:
ROAD CONSTRUCTION FEES for EVs under HS 8703.80.91 and 8703.80.99 with CIF value up to Rs 20 lakh: 5% → 2.5%
Tobacco customs — raised
┌────────────────────────────────────┬──────────────┬──────────────┐
│ PRODUCT (per 1,000 sticks) │ EXISTING Rs │ REVISED Rs │
├────────────────────────────────────┼──────────────┼──────────────┤
│ Cigarettes with tobacco │
│ (including cigarillo) │ 11,000 │ 12,000 │
│ Filter-less cigarette │ 5,500 │ 6,000 │
│ With filter — ≤ 70 mm │ │ │
│ With filter — > 70 and ≤ 75 mm │ 5,500 │ 6,000 │
│ With filter — > 75 and ≤ 85 mm │ │ │
│ With filter — > 85 mm │ │ │
│ Manufactured bidi │ 5,500 │ 6,000 │
│ All types of cigars │ 11,000 │ 12,000 │
│ Others │ 11,000 │ 12,000 │
└────────────────────────────────────┴──────────────┴──────────────┘
VAPING DEVICES — electronic cigarettes and similar personal
electronic equipment used for vaporizing:
customs duty 20% → 30%Trade facilitation and banking channel rules
┌──────────────────────────────────────────────────────────────────────┐ │ BARTER WITH TIBET, CHINA │ │ These may be imported by barter or through banking: │ │ raw wool · live sheep · salt · chauri cattle and tails · │ │ carpets · herbs │ │ │ │ ALL OTHER GOODS MUST USE BANKING CHANNELS. │ │ ! Not mandatory for exports or imports of goods valued up to │ │ Rs 16,000. │ ├──────────────────────────────────────────────────────────────────────┤ │ EXPORT PROCEEDS │ │ Exporters of goods made in Nepal may export up to USD 25,000 │ │ WITHOUT immediately submitting foreign exchange receipt │ │ documents — but must submit the receipts, or proof of returned │ │ goods, WITHIN SIX MONTHS. │ │ │ │ ! If they do not, the Customs Officer initiates legal action │ │ under foreign exchange laws. │ ├──────────────────────────────────────────────────────────────────────┤ │ BONDED WAREHOUSE / PASSBOOK (and see Part 12) │ │ An industry licensed as a bonded warehouse under bank guarantee, │ │ or importing under the passbook facility, may secure release of │ │ bank guarantees or refund of cash deposits if it failed to export │ │ finished goods from imported raw materials within the legal │ │ deadline — provided it exports by Mangsir end 2083, receives the │ │ foreign currency proceeds, and applies with documentary evidence. │ └──────────────────────────────────────────────────────────────────────┘
Sector exemptions
┌──────────────────────────────────────────────────────────────────────┐ │ HYDROPOWER │ │ Approved projects may import construction equipment, machinery, │ │ tools, spare parts, explosives, penstock pipes and steel plates │ │ UNDER A BANK GUARANTEE for customs, excise and VAT, on │ │ Department of Electricity Development recommendation. │ │ │ │ ⇒ A bank guarantee rather than an outright exemption: the duty │ │ is secured, not forgiven, until conditions are met. │ ├──────────────────────────────────────────────────────────────────────┤ │ HEALTH │ │ An approved health institution may send patient specimens abroad │ │ or bring them into Nepal for testing WITHOUT customs duty. │ ├──────────────────────────────────────────────────────────────────────┤ │ BREWERIES │ │ May import crown cork ONLY with a recommendation from the │ │ Inland Revenue Office. │ ├──────────────────────────────────────────────────────────────────────┤ │ GEN-Z MOVEMENT DAMAGE │ │ Industries, businesses and commercial establishments damaged │ │ during the Gen-Z movement receive a 50% CUSTOMS AND EXCISE │ │ EXEMPTION on imports needed for restoration and operation, │ │ based on items verified in the INSURANCE SURVEYOR'S REPORT. │ │ → see also Part 12 │ └──────────────────────────────────────────────────────────────────────┘
Diplomatic and personal imports
┌──────────────────────────────────────────────────────────────────────┐ │ DIPLOMATIC / DUTY-EXEMPT GOODS SOLD OR GIFTED AFTER 5 YEARS │ │ A 60% concession on the applicable customs duty under │ │ Schedule 3 applies. Usable ONCE during the beneficiary's │ │ official tenure in Nepal. │ ├──────────────────────────────────────────────────────────────────────┤ │ DIPLOMATIC VEHICLES │ │ Missions, personnel, projects and agencies may scrap motor │ │ vehicles imported under customs privilege if the vehicles are │ │ • over 10 years old, OR │ │ • have been used for at least 10 years, OR │ │ • are inoperable due to accidents or technical reasons. │ │ With ministry approval, they may de-register by scrapping │ │ WITHOUT customs duty liability. │ ├──────────────────────────────────────────────────────────────────────┤ │ RETURNING PASSENGERS — GOLD ORNAMENTS │ │ │ │ Duty-free: up to 25 g (men) / 50 g (women) │ │ Next 50 g: prevailing duty │ │ Further 50 g: prevailing duty PLUS 3% │ │ Any excess: CONFISCATED │ │ │ │ ┌────────────────────────────────────────────────────────┐ │ │ │ Men 0 ──25g── free ──75g── duty ──125g── duty+3% │ │ │ │ then CONFISCATED │ │ │ │ Women 0 ──50g── free ──100g── duty ──150g── duty+3% │ │ │ │ then CONFISCATED │ │ │ └────────────────────────────────────────────────────────┘ │ └──────────────────────────────────────────────────────────────────────┘
Common mistakes
MYTH "Fewer customs tiers is just tidying."
FACT Fewer boundaries means fewer classification disputes and less
border discretion. It is a real facilitation measure.
MYTH "Raw material duty cuts are a giveaway to importers."
FACT They create EFFECTIVE PROTECTION for domestic manufacturing —
the gap between input and output duty is the policy.
MYTH "EV duty is 20%, so an expensive EV pays 20%."
FACT Customs duty is flat at 20%; the CIIF is where the
progressivity sits — up to 20% + 110% additional.
MYTH "Fuel got cheaper because duty was halved."
FACT A 10% green tax was added at the same time. Do the arithmetic
on the specific line. [R]
MYTH "Hydropower imports are duty-exempt."
FACT They move under a BANK GUARANTEE — secured, not forgiven.
MYTH "I can bring back as much gold as I pay duty on."
FACT Beyond the stated bands, excess is CONFISCATED.Part 10 — Revision table
| Item | FY 2083/84 position |
|---|---|
| Tier structure | **11 tiers → 7** |
| Industrial raw materials | Duty cut on **273 items**, kept at least **one slab below** finished goods |
| Green tax | Consolidates infrastructure tax, road maintenance fee and other customs-point charges; **10%** on imported petrol and diesel |
| Fuel customs duty | **Reduced 50%** on petrol (2710.12.10), kerosene (2710.19.10), high-speed diesel (2710.19.30) |
| CIIF | Clean Infrastructure Investment Fee on imports — funds local production, charging stations, battery systems |
| EV basis | **Motor output capacity → purchase value (CIF)** |
| EV customs duty | **Flat 20%** in every band |
| EV CIIF | 2.5% (≤20 lakh) · 20% (20–30) · 20%+15% (30–40) · 20%+70% (40–50) · 20%+110% (>50 lakh) |
| EV road construction fee | 5% → **2.5%** for HS 8703.80.91 / .99 with CIF up to Rs 20 lakh |
| Cigarettes with tobacco / cigars / others | Rs 11,000 → **Rs 12,000** per 1,000 sticks |
| Filter-less / filtered / bidi | Rs 5,500 → **Rs 6,000** per 1,000 sticks |
| Vaping devices | Customs **20% → 30%** |
| Banking channel | Mandatory except listed Tibet/China barter goods; **not mandatory up to Rs 16,000** |
| Export FX documents | Up to **USD 25,000** without immediate submission; receipts within **6 months** |
| Hydropower | Bank guarantee for customs, excise and VAT on approved equipment (DoED recommendation) |
| Gen-Z movement damage | **50%** customs and excise exemption for restoration, per insurance surveyor's report |
| Diplomatic goods after 5 years | **60%** concession under Schedule 3, once per tenure |
| Gold, returning passengers | Free to 25 g (men) / 50 g (women); next 50 g duty; further 50 g duty **+3%**; excess **confiscated** |
| Verify | Department of Customs + Finance Act 2083 |
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